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Level 26
· ◆◆◆◆◆ · ~13 min
Jump-Diffusion Models
Adding crashes: jumps, fat tails, and incomplete markets.
"Real prices gap. Diffusions alone can't."
Poisson & compound PoissonMerton jump-diffusionfat tails & the short-dated smilePIDEhedging incompleteness
A short lesson, then a quiz. ❤️×3 — a wrong answer costs a heart; finish with at least one left and the level is yours. Lose all three and you'll have to try again. Replay any time — XP and cleared levels are never lost.