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A NOTE ON A NEW APPROACH TO BOTH PRICE AND VOLATILITY JUMPS: AN APPLICATION TO THE PORTFOLIO MODEL

  • MOAWIA ALGHALITH (a1)

Abstract

A new approach to jump diffusion is introduced, where the jump is treated as a vertical shift of the price (or volatility) function. This method is simpler than the previous methods and it is applied to the portfolio model with a stochastic volatility. Moreover, closed-form solutions for the optimal portfolio are obtained. The optimal closed-form solutions are derived when the value function is not smooth, without relying on the method of viscosity solutions.

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A NOTE ON A NEW APPROACH TO BOTH PRICE AND VOLATILITY JUMPS: AN APPLICATION TO THE PORTFOLIO MODEL

  • MOAWIA ALGHALITH (a1)

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