Option pricing for a logstable asset price model |
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| Affiliation: | Centre for Financial Mathematics School of Mathematical Sciences The Australian National University, Canberra ACT 0200, Australia;Department of Statistics and Applied Probability University of California, Santa Barbara Santa Barbara, CA 93106-3110, U.S.A. |
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| Abstract: | ![]()
The paper generalises the celebrated Black and Scholes [1] European option pricing formula for a class of logstable asset price models. The theoretical option prices have the potential to explain the implied volatility smiles evident in the market. |
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