Currently applying the Merton's jump diffusion to test how Option price change as parameters change. However, I am struggling to specify the poisson rate $\lambda$. We know that:
$P(\text{There is a jump})= \lambda dt $ and $P(\text{There is not a jump})= 1-\lambda dt $
I am using the code provided by the following link:
I am confused with the term poisson rate. Do we refer in the jump rate as as percent of the total steps $T/N$, which is the cardinality of the partition (e.g $5\%$= "5 jumps per 100 steps", which is $\lambda dt$) or the arrival rate in the whole interval (e.g 120 jumps in total, which is $\lambda$)?