Jump Diffusion Logistic Brownian Motion With Dividend Yielding Asset


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Authors

  • M. O. Opondo School of Mathematics and Actuarial Science, Jaramogi Oginga Odinga University of Science and Technology, Bondo, Kenya
  • D. B. Oduor School of Mathematics and Actuarial Science, Jaramogi Oginga Odinga University of Science and Technology, Bondo, Kenya
  • F. Odundo School of Mathematics and Actuarial Science, Jaramogi Oginga Odinga University of Science and Technology, Bondo, Kenya

Keywords:

Geometric Brownian motion, Logistic Brownian motion, Jump diffusion, dividend yielding asset, Stochastic Process, Wiener process, Ito's Process

Abstract

Jump diffusion processes have been used in modern finance to capture discontinuous behavior in asset pricing. Logistic Brownian motion for asset security prices shows that naturally asset security prices would not usually shoot indefinitely due to the regulating factor that may limit the asset prices. Geometric Brownian motion can not accurately reflect all behaviors of stock quotation therefore, Merton who was involved in the process of developing the Black-Scholes model came up with Merton jump model superimposed on Geometric Brownian motion without considering the dividend yielding rate of the asset. Therefore in this paper, we have derived the price of dividend yielding asset that follows logistic Brownian motion with jump diffusion process. This study uses the knowledge of Geometric Brownian Motion and logistic Brownian motion with Heaviside's Cover-up Method to develop the price of dividend yielding asset that follows logistic Brownian motion with jump-diffusion process.

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Published

15-12-2021

How to Cite

M. O. Opondo, D. B. Oduor, & F. Odundo. (2021). Jump Diffusion Logistic Brownian Motion With Dividend Yielding Asset. International Journal of Mathematics And Its Applications, 9(4). Retrieved from http://ijmaa.in/index.php/ijmaa/article/view/25

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Section

Research Article