Modeling Stock Return Distributions and Pricing Options

Xinxin Jiang

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arXiv · 2503.08666

Modeling Stock Return Distributions and Pricing Options

Xinxin Jiang

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Abstract

This paper provides evidence that stock returns, after truncation, might be modeled by a special type of continuous mixtures or normals, so-called $q$-Gaussians. Negative binomial distributions might model the counts for extreme returns. A generalized jump-diffusion model is proposed, and an explicit option pricing formula is obtained.

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Xinxin Jiang. 2025-03-11. Modeling Stock Return Distributions and Pricing Options. https://arxiv.org/abs/2503.08666

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