I think that the normal inverse Gaussian (google search for densities, etc) has a similar property.A.

<t>Miesje, firstly, your Radom-Nikodym derivative (dP*/dP) must be a martingale under the original measure (dP). this means that the second line is wrong. secondly, to transform your drift from \mu to \nu, you need not just (\nu-\mu)*B but ((\nu-\mu)/vol)*B and then subtract the quadratic variation ...

Here.A.

maybe I'm wrong, but, can't you get the characteristic function of S^2 from that of S? Then you just have to apply the Carr/Madan 98 method... or am I missing something? A.

The price of a barrier call of an asset modeled by a jump-diffusion process exists in close form only for the double-exponential jump-diffusion model, also known as Steven Kou's model. Have a look at his hompage. There is also a paper by Alex Lipton at "Risk" (Jan 2002) on the same topic.A.

Hi enginkuru, I guess that gamma is the relative jump size, right? So, holding the gamma constant and increasing the number of expected jumps, one would expect a more pronounced vol smile. Have a look here as well, JD charts.Is your Brownian vol constant as well??A.

What do you mean by "partial lookback option"? can you write down the payoff? Also, which model do you use?A.

You can have a look at the Introduction to Latex guide. Chapter 3 has a lot about maths.A.

<t>Have a look at: "The Term Structure of Simple Forward Rates with Jump Risk",P. Glasserman and S.G. Kou, Mathematical Finance 13 2003, 383-410."Term structure models driven by general Lévy processes", E. Eberlein and S. Raible, Mathematical Finance 9 1999, 31-53."The Lévy Libor Model",E. Eberlein ...

<t>You might also want to have a look at what Alexander Cherny termed the "Possibility Approach"; I heard his talk at the BFS Congress and found the idea very interesting.Here is the paper.The main difference from the traditional method is that he <i>does not</i> specify a probability measure on his...

Sorry....These two book hace a very different approach to Levy processes. Bertoin is using excursion-theoretic arguments, while Sato is based on analytic arguments. If you are a beginner, you might want to have a look at Applebaum's book "Levy Processes and Stochastic Calculus". regards,A.

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WannaBeDude,This equation, >> S=S*Exp( (mu-0.5*sigma*sigma) * dt + sigma * sqrt(dt) * z)if mu is equals your asset's rate of return and z is a Wiener process, would make the discounted asset price process S/B (B=bank account) a martingale.

Read the article of F. Delbaen and W. Schachermayer What is a Free lunch?, it will solve your questions (I hope).A.

Akalypte, have a look at Vecer's paper "Unified Asian pricing", it improves the method of the paper you have uploaded.A.