Acta mathematica scientia,Series A

   

Application of VG Distortion Operator in Option Pricing

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  1. 1. Hunan University of Technology and Business
    2.
  • Received:2020-11-24 Revised:2023-01-29 Published:2023-04-12

Abstract: Using the idea of probability transformation,VG distortion operator is proposed based on the distribution of VG. It is shown that option prices obtained by VG distortion operator are consistent with option prices obtained under the mean correcting martingale measure in the VG model. The numerical results show that option prices obtained by VG distortion operator are very accurate.

Key words: Option pricing, VG distribution, VG distortion operator

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