• Title of article

    Option pricing for non-Gaussian price fluctuations

  • Author/Authors

    Hagen Kleinert، نويسنده ,

  • Issue Information
    روزنامه با شماره پیاپی سال 2004
  • Pages
    9
  • From page
    151
  • To page
    159
  • Abstract
    From the path integral description of price fluctuations with non-Gaussian distributions we derive a stochastic calculus which replaces Itôʹs calculus for harmonic fluctuations. We set up a natural martingale for option pricing from the wealth balance of options, stocks, and bonds, and evaluate the resulting formula for truncated Lévy distributions. After this, an alternative formula is derived for a model of multivariant Gaussian price fluctuations which leads to non-Gaussian return distributions fitting Dow Jones data excellently from long to short time scales with a tail behavior e−x/x3/2.
  • Journal title
    Physica A Statistical Mechanics and its Applications
  • Serial Year
    2004
  • Journal title
    Physica A Statistical Mechanics and its Applications
  • Record number

    869294