Instruct: Identify the main and secondary category of Arxiv papers based on the titles and abstracts
Query: Financial Modeling and Option Theory with the Truncated Levy Process   In recent studies the truncated Levy process (TLP) has been shown to be very
promising for the modeling of financial dynamics. In contrast to the Levy
process, the TLP has finite moments and can account for both the previously
observed excess kurtosis at short timescales, along with the slow convergence
to Gaussian at longer timescales. I further test the truncated Levy paradigm
using high frequency data from the Australian All Ordinaries share market
index. I then consider, for the early Levy dominated regime, the issue of
option hedging for two different hedging strategies that are in some sense
optimal. These are compared with the usual delta hedging approach and found to
differ significantly. I also derive the natural generalization of the
Black-Scholes option pricing formula when the underlying security is modeled by
a geometric TLP. This generalization would not be possible without the
truncation.

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The categories of this paper are: econ
32
The categories of this paper are: atom-ph
26
The categories of this paper are: bayes-an
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The categories of this paper are: acc-phys
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The categories of this paper are: nucl-ex
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The categories of this paper are: cmp-lg
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The categories of this paper are: nlin
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The categories of this paper are: hep-ex
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The categories of this paper are: math-ph
1
The categories of this paper are: cs
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The categories of this paper are: chem-ph
13
The categories of this paper are: quant-ph
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The categories of this paper are: stat
2
The categories of this paper are: math
6
The categories of this paper are: astro-ph
11
The categories of this paper are: hep-lat