SimulateJumpDiffusionMerton: Simulates a Merton jump-diffusion process.

In R-Finance/Meucci: Collection of functionality ported from the MATLAB code of Attilio Meucci.

Description

This function simulates a jump diffusion process, as described in A. Meucci "Risk and Asset Allocation", Springer, 2005.

Usage

  SimulateJumpDiffusionMerton(m, s, l, a, D, ts, J)

Arguments

m	[scalar] deterministic drift of diffusion
s	[scalar] standard deviation of diffusion
l	[scalar] Poisson process arrival rate
a	[scalar] drift of log-jump
D	[scalar] st.dev of log-jump
ts	[vector] time steps
J	[scalar] number of simulations

Value

X [matrix] (J x length(ts)) of simulations

Author(s)

Xavier Valls [e-mail]

References

A. Meucci - "Exercises in Advanced Risk and Portfolio Management" http://symmys.com/node/170, "E 132 - Simulation of a jump-diffusion process".

See Meucci's script for "SimulateJumpDiffusionMerton.m"

Merton, R. C., 1976. "Option pricing when underlying stocks are discontinuous". Journal of Financial Economics 3, 125-144.

R-Finance/Meucci documentation built on May 8, 2019, 3:52 a.m.