Discrete-Time Jump-Diffusion Trees and Recombination

Summary

The document raises a modeling question about representing a jump-diffusion process in discrete time. It notes that Amin (1993) presents a convergent discrete version, but describes it as computationally inefficient and non-recombining. Other proposed approaches are mentioned as attempts to improve efficiency, though the author says they still do not recombine efficiently.

The author also asks whether any jump models are fully recombining. No candidate model, derivation, comparison, or supporting evidence is provided, so the text is a research question rather than a tutorial or a tested method. Its value is in identifying the computational tradeoff between convergence, efficiency, and recombination in discrete-time models with jumps; readers would need the cited literature or further research to evaluate the claims.

Key ideas

• Amin (1993) is identified as a convergent discrete-time jump-diffusion construction.
• The author characterizes that construction as inefficient and non-recombining.
• Other proposed methods are said to improve on it without achieving efficient recombination.
• The document leaves open whether a fully recombining jump model exists.

Tags

# Discrete-time Jump-Diffusion Model


# Discrete-time Jump-Diffusion Model












I am wondering if anybody could point me to any literature that talks about a discrete time version of the jump-diffusion model, I am aware that there is a paper by Amin (1993) that shows a discrete version of this model that converges, however it is very inefficient and does not recombine, there are a few other papers that try to improve this but they still do not recombine efficiently.

Another related question is, are there any models that introduce jumps but are fully recombining?

Thank you,

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