# Jump Diffusion

*Quant & Pricing — Finicade finance glossary*

A pricing model that adds sudden jumps to the smooth wandering of Brownian motion — capturing crashes and gap moves that a pure diffusion misses. Better fat tails, at the cost of more complexity.

**Also known as:** merton-jump-diffusion, poisson-and-compound-poisson

**Related terms:** [Brownian Motion](https://finicade.com/glossary/brownian-motion), [Fat Tails](https://finicade.com/glossary/fat-tails), [Stochastic Volatility](https://finicade.com/glossary/stochastic-volatility)

**Taught in:** Quant Quest — Jump-Diffusion Models

Source: https://finicade.com/glossary/jump-diffusion