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The generalized hyperbolic model: Financial derivatives and risk measures. (English) Zbl 0996.91067
Geman, Helyette (ed.) et al., Mathematical finance - Bachelier congress 2000. Selected papers from the 1st world congress of the Bachelier Finance Society, Paris, France, June 29 - July 1, 2000. Berlin: Springer. Springer Finance. 245-267 (2002).
Summary: Statistical analysis of data from the financial markets shows that Generalized Hyperbolic (GH) distributions allow a more realistic description of asset returns than the classical normal distribution. GH distributions contain as subclasses hyperbolic as well as normal inverse Gaussian distributions which have recently been proposed as basic ingredients to model price processes. GH distributions generate in a canonical way Lévy processes, i.e. processes with stationary and independent increments. We introduce a model for price processes which is driven by generalized hyperbolic Lévy motions. This GH model is a generalization of the hyperbolic model developed by E. Eberlein and U. Keller [Bernoulli 1, 281-299 (1995; Zbl 0836.62107)]. It is incomplete. We derive an option pricing formula for GH driven models using the Esscher transform as martingale measure and compare the prices with classical Black-Scholes prices. The objective of this study is to examine the consistency of our model assumptions with the empirically observed price processes for underlyings and derivatives. Finally we present a simplified approach to the estimation of high-dimensional GH distributions and their application to measure risk in financial markets.
For the entire collection see [Zbl 0978.00046].

MSC:
91B28 Finance etc. (MSC2000)
91B30 Risk theory, insurance (MSC2010)
62P20 Applications of statistics to economics
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