2004•Chinese Journal of Applied Probability and StatistiesRequires access

Changes of Probability Measure and Options Pricing in Jump-Diffusion Models

Xinrui Qian

Abstract

This paper studies the relation between changes of probability measure and option pricing in a jump-diffusion model. By choosing different numeraire and corresponding probability measure, we give the formula of European options in a stochastic interest rate framework and get some results about exchange options and Asian options in jump-diffusion models.

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Key concepts: Mathematics, Numéraire, Jump diffusion, Measure (data warehouse), Probability measure, Jump, Diffusion, Econometrics