I am trying to understand the concept of jump diffusion model. So far what I've understood is that by adding a Jump parameter to a GBM (Geometric Brownian Motion) we can generate a Jump diffusion model. To add jump parameter we need to calculate the jump coefficient at each time step.

I am not sure on how to calculate jump size at each time step and how would I calculate mean(mu) and variance(sigma) of jump size?

Can anyone suggest a reading which is simpler to understand?


Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.