Title: The Importance of Jumps in Pricing European Options
Authors: CAMPOLONGO FRANCESCACARIBONI JessicaSCHOUTENS WIM
Citation: RELIABILITY ENGINEERING & SYSTEM SAFETY vol. 91 no. 10-11 p. 1148-1154
Publisher: ELSEVIER SCI LTD
Publication Year: 2006
JRC N°: JRC34880
URI: http://publications.jrc.ec.europa.eu/repository/handle/JRC34880
Type: Articles in Journals
Abstract: The screening method proposed by Morris and recently improved by Campolongo et al. has been employed to estimate the importance of the inclusion of jumps in a model for pricing European options. Results confirm that, among the sources of uncontrollable uncertainty, jumps play a major role and therefore need to be better investigated in order to improve the accuracy of the model predictions. The importance of jumps is more pronounced for higher option strike prices, which is when the option is ‘‘out of the money’’.
JRC Institute:Institute for the Protection and Security of the Citizen

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