Financial Analysis
Riskless Rate
August 11, 2021
Financial Analysis
Regular Income
August 11, 2021

It stands for variance gamma model; an option pricing model which is based purely on jumps between successive nodes where small jumps occur often and large jumps occur infrequently. This model also encompasses a Brownian process in addition to the jump component.

The VG model was introduced in view of the limitations suffered by the Black-Scholes model especially as exemplified by volatility smile and parameter instability.

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