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
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