Log-Uniform Jump-Diffusion Model

European call option price and implied volatility for a Log-Uniform Jump-Diffusion model.

Description

JDprice.m : Compute European call option price using a Log-Uniform Jump-Diffusion model.
Algorithm used: Monte Carlo with antithetic and control variates techniques.

JDimpv : Compute the implied volatilities from the market values of European calls using a Log-Uniform Jump-Diffusion model. (the input "value" may be a matrix)

BS.m: Compute European call option price using the Black-Scholes model (used in JDprice)

Acknowledgements:

Thanks to Zongwu Zhu and Floyd B. Hanson for their paper
"A Monte-Carlo Option-Pricing Algorithm for Log-Uniform".

• MATLAB release: MATLAB 7.5 (R2007b)

[Stephen Huang]

Volatility surface under compound jump diffusion is one of the most complext areas of quantitative finance, and relevant resources are very rare throughout the web. Therefore I am delighted Rodolphe has made this amazing file! Besides the spenldid numerical performance, the file itself is a very good learning samples for computational finance. I highly recommend this to both programmers and mathematicians!

[Kim Chiang]

Good, except for some small bug in the code. the miss use of function "sum" makes the program not stable. You mentioned it is not stable for large number. It is caused by this.

[Rodolphe Sitter]

Thanks Kim, I fixed the bug, it is now stable for a large number of Monte-Carlo simulations