Option pricing formulas based on a non-Gaussian stock price model

被引:159
作者
Borland, L [1 ]
机构
[1] Iris Financial Engn & Syst, San Francisco, CA 94104 USA
关键词
D O I
10.1103/PhysRevLett.89.098701
中图分类号
O4 [物理学];
学科分类号
0702 ;
摘要
Options are financial instruments that depend on the underlying stock. We explain their non-Gaussian fluctuations using the nonextensive thermodynamics parameter q. A generalized form of the Black-Scholes (BS) partial differential equation and some closed-form solutions are obtained. The standard BS equation (q=1) which is used by economists to calculate option prices requires multiple values of the stock volatility (known as the volatility smile). Using q=1.5 which well models the empirical distribution of returns, we get a good description of option prices using a single volatility.
引用
收藏
页码:987011 / 987014
页数:4
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