CONTENTS

Exercise: Merton Jump-Diffusion: convention check

Prerequisites: Merton Jump-Diffusion

Problem

  1. State the relevant definition for Black-Scholes is enriched by compound Poisson jumps.
  2. Apply it to a small numerical or symbolic example of your choice.
  3. Explain which convention or modelling assumption is doing the most work.

Hint

Jump to the solution when you are ready.