Abstract:We provide series expansions for the tempered stable densities and for the price of European-style contracts in the exponential Lévy model driven by the tempered stable process. These formulas recover several popular option pricing models, and become particularly simple in some specific cases such as bilateral Gamma process and one-sided TS process. When compared to traditional Fourier pricing, our method has the advantage of not involving delicate choices of hyperparameters, but only a truncation order for the resulting analytical pricing formulas. We also provide a detailed numerical analysis and show that our technique is competitive with state-of-the-art pricing methods.
From: Jean-Philippe Aguilar [view email]
[v1]
Wed, 17 Sep 2025 16:01:01 UTC (626 KB)
[v2]
Fri, 4 Sep 2026 16:29:46 UTC (758 KB)
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