In a recent working paper, cited as Thul and Zhang (2014) below, we propose a novel jump-diffusion model whose jump sizes follow an asymmetrically displaced double gamma (AD-DG) distribution. Through empirical tests, we find that the newly introduced displacement terms are highly significantly different from zero and from each other for a wide range of assets. A key feature of this model is, that it still admits closed-form solutions for European plain vanilla options. In this and the following blog posts, I discuss a few aspects related to the AD-DG jump-diffusion model that, for brevity, did not find their way into the working paper.

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