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Numerous empirical studies have shown that certain exponential Lévy models are able to fit the empirical distribution of daily financial returns quite well. By contrast, very few papers have considered intraday data in spite of their growing importance. In this paper, we fill this gap by studying the ability of the Normal Inverse Gaussian (NIG) and the(More)
Abstract: High frequency based estimation methods for a pure-jump subordinated Brownian motion exposed to a small additive microstructure noise are developed building on the two-scale realized variations approach developed by Zhang et al. (2005) for the estimation of a continuous Itô process. The proposed estimators are shown to be robust against the noise(More)
High frequency based estimation methods for a semiparametric pure-jump subordinated Brownian motion exposed to a small additive microstructure noise are developed building on the two-scales realized variations approach originally developed by Zhang et al. (2005) for the estimation of the integrated variance of a continuous Itô process. The proposed(More)
We study a discrete time hedging and pricing problem in a market with liquidity costs. Using Leland’s discrete time replication scheme [Leland, H.E., 1985. Journal of Finance, 1283–1301], we consider a discrete time version of the Black–Scholes model and a delta hedging strategy. We derive a partial differential equation for the option price in the presence(More)
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