dmerton: The probability density function under Merton's...

In shill1729/findistr: Common distributions used in finance

The probability density function under Merton's jump-diffusion model for log-price dynamics

Description

The PDF of the log-returns in a time interval under Merton's jump diffusion model. Includes compensator in the drift.

Usage

dmerton(x, t, param)

Arguments

x	input value for the CDF
t	the time input, for daily use 1/252
param	a vector of parameters defining Merton's jump dynamics. See details.

Details

The argument param must be a vector of five real numbers, (\mu, \sigma, \lambda, \alpha, \beta), representing the mean drift, volatility, mean-rate of jumps, and the mean log-jump size and the standard deviation of the log-jump size, in this order. The volatility, mean rate of jumps, and standard deviation of log-jump size must all be positive.

Value

numeric or vector depending on the length of the input x.

shill1729/findistr documentation built on May 20, 2024, 9:43 a.m.