“…This study contributes to the existing literature in several ways: First, the nature of jump clustering is included in the model and a closed‐form exact formula is presented. The proposed model is very general, of which the results obtained from the Black–Scholes model, Merton jump‐diffusion model, Heston stochastic volatility model, and their combinations can all be considered as special cases, which include Broadie and Jain (), Zhu and Lian (, ), Rujivan and Zhu (, ), and Zheng and Kowk (), etc. Second, we provide a significantly simplified method different from those reported in the literature to obtain the analytical formula without resorting to partial differential equations.…”