On the In nite Variance Option Price Models

In nite variance distributions are among the competing models used to explain thenon-normality of stock price changes (Mandelbrot, 1963; Fama, 1965; Mandelbrotand Taylor, 1967; Rachev and Samorodnitsky, 1993). We use a recursion techniqueto investigate and quantify various characteristics of the asymptotic option priceformula, in in nite variance setting. This shows that such formulae, and even theirapproximations, may be di cult to apply in practice.