Please use this identifier to cite or link to this item:
http://hdl.handle.net/2445/34159
Title: | Renewal equations for option pricing |
Author: | Montero Torralbo, Miquel |
Keywords: | Rutes aleatòries (Matemàtica) Processos estocàstics Economia Random walks (Mathematics) Stochastic processes Economics |
Issue Date: | 2008 |
Publisher: | Springer Verlag |
Abstract: | In this paper we will develop a methodology for obtaining pricing expressions for financial instruments whose underlying asset can be described through a simple continuous-time random walk (CTRW) market model. Our approach is very natural to the issue because it is based in the use of renewal equations, and therefore it enhances the potential use of CTRW techniques in finance. We solve these equations for typical contract specifications, in a particular but exemplifying case. We also show how a formal general solution can be found for more exotic derivatives, and we compare prices for alternative models of the underlying. Finally, we recover the celebrated results for the Wiener process under certain limits. |
Note: | Versió postprint del document publicat a: http://dx.doi.org/10.1140/epjb/e2008-00349-8 |
It is part of: | European Physical Journal B, 2008, vol. 65, num. 2, p. 295-306 |
URI: | http://hdl.handle.net/2445/34159 |
Related resource: | http://dx.doi.org/10.1140/epjb/e2008-00349-8 |
ISSN: | 1434-6028 |
Appears in Collections: | Articles publicats en revistes (Física de la Matèria Condensada) |
Files in This Item:
File | Description | Size | Format | |
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566009.pdf | 313.96 kB | Adobe PDF | View/Open |
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