D.P.J. Leisen (Germany)
mixed lognormal distribution, jump-diffusion, stochastic volatility, Greeks, risk-management.
Many derivatives prices are closed-form expressions in the Black-Scholes model; when the terminal distribution is a mixed lognormal, prices for these derivatives are then a weighted average of these (closed-form) expressions. They can therefore be calculated easily and efficiently for mixed lognormal distributions. For illustration this paper con structs mixed lognormal distributions that approximate the terminal distribution in the Merton model (Black-Scholes model with jumps).
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