Option pricing with time-changed Lévy processes

Sven Klingler, Young Shin Kim, Svetlozar T. Rachev, Frank J. Fabozzi

Research output: Contribution to journalArticlepeer-review

11 Scopus citations


In this article, we introduce two new six-parameter processes based on time-changing tempered stable distributions and develop an option pricing model based on these processes. This model provides a good fit to observed option prices. To demonstrate the advantages of the new processes, we conduct two empirical studies to compare their performance to other processes that have been used in the literature.

Original languageEnglish
Pages (from-to)1231-1238
Number of pages8
JournalApplied Financial Economics
Issue number15
StatePublished - Aug 2013


  • Lévy processes
  • option pricing
  • stochastic volatility
  • stochastic-time change
  • tempered stable distributions


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