Option pricing using subordinated and infinitely divisible return processes

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The dramatic growth of options markets around the world has lead to a surge of interest in a correct pricing model. The most widely used models for the pricing of European options are the discrete-time models of Cox, Ross and Rubinstein (CRR) and the Black and Scholes (BS) model, one of its possible continuous-time limits. A view of these limitations, we analyze the implications of two alternative aproaches to option pricing. The subordinated pricing model generalizes the BS model by incorporating a stochastic operational time scale of the market in the stock price process.