variance gamma process simulation

Squal · September 2nd, 2007, 2:40 pm

Hi, Could someone tell me how to simulate a gamma variance process ? What is the draxback of this kind of process to use it or not in finance

lesliejinyu · September 2nd, 2007, 5:58 pm

i assume you are asking for simulating variance gamma process, which is a subordinated Brownian motion with gamma time change. you may first simulate a sequence of gamma variates with appropriate parameters. then you can simulate a path of BM by replacing fixed time interval by the simulated gamma time change (cf. Rama Cont and Tankov p.184, algorithm 6.11).

Rez · September 3rd, 2007, 7:23 am

the simplest way could be to represent it as a difference of two Gamma processesKyriakos