A general Ornstein-Uhlenbeck stochastic volatility model with Lévy jumps

We present a general class of stochastic volatility models with jumps where the stochastic variance process follows a Lévy-driven Ornstein-Uhlenbeck (OU) process and the jumps in the log-price process follow a Lévy process. This financial market model is a true extension of the Barndor-Nielsen-Shephard (BNS) model class and can establish a weak link between log-price jumps and volatility jumps. Furthermore, we investigate the weak-link Gamma-OU-BNS model as a special case, where we calculate the characteristic function of the logarithmic price in closed form. Moreover, we show that the classical Gamma-OU-BNS model can be obtained as a limit of weak-link Gamma-OU-BNS models in the Skorokhod topology.     «

We present a general class of stochastic volatility models with jumps where the stochastic variance process follows a Lévy-driven Ornstein-Uhlenbeck (OU) process and the jumps in the log-price process follow a Lévy process. This financial market model is a true extension of the Barndor-Nielsen-Shephard (BNS) model class and can establish a weak link between log-price jumps and volatility jumps. Furthermore, we investigate the weak-link Gamma-OU-BNS model as a special case, where we calculate the...     »