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dc.contributor.authorLi, S.
dc.contributor.authorZhou, Y.
dc.contributor.authorWu, Yong Hong
dc.contributor.authorGe, X.
dc.identifier.citationLi, S. and Zhou, Y. and Wu, Y.H. and Ge, X. 2017. Equilibrium approach of asset and option pricing under Lévy process and stochastic volatility. Australian Journal of Management. 42 (2): pp. 276-295.

This paper studies the equity premium and option pricing under the general equilibrium framework taking into account stochastic volatility. We establish analytical expressions for the equity premium and pricing kernel of the stock process. Moreover, the equilibrium option pricing formula is derived by the Fourier transformation method. Numerical results show that our model is superior to the previous model with constant volatility in explaining some financial phenomena, such as negative variance risk premium, implied volatilities and negative skewness risk premium. As the price of the underlying asset is modeled as the exponential of the Lévy process with stochastic volatility, our model is more general than the existing equilibrium pricing models.

dc.publisherSage Publications
dc.titleEquilibrium approach of asset and option pricing under Lévy process and stochastic volatility
dc.typeJournal Article
dcterms.source.titleAustralian Journal of Management
curtin.departmentDepartment of Mathematics and Statistics
curtin.accessStatusFulltext not available

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