From the abstract >Merton jump-diffusion model (1976) which is an exponential Lévy model with finite arrival rate of jumps, This is funny because my graduate

From the abstract >Merton jump-diffusion model (1976) which is an exponential Lévy model with finite arrival rate of jumps, This is funny because my graduate thesis is about models based on Hawkes processes, that is, jump with a path-dependent and self-exciting intensity process. Instead of taking the arrival time of jumps (often the parameter lambda) to be constant, in a Hawkes process a jump increases the probability of another jump (positive feedback), leading to clusters of jumps we often see in crises. I love how this paper might seem "magic" and voodoo and most importantly "true" to people who don't know much about mathematical finance. The point is that the models here are most likely wrong and have GLARING flaws in them, yet are still used to price REAL things in REAL life. All models are wrong, some are less wrong than others. The point is, how wrong do our models have to be before we get some really bad consequences (2008 financial crisis, anyone?) P.S. Please rewrite this in LaTeX, posting a 250 page document written in Word makes me 90% less likely to read it (compared to something written in LaTeX)