Option Pricing from Path Integral for Non-Gaussian Fluctuations. Natural Martingale and Application to Truncated Lévy Distributions

Preprint

19 February 2002

preprint
Published by arXiv in arXiv

https://doi.org/10.48550/arXiv.cond-mat/0202311

Abstract

Within a path integral formalism for non-Gaussian price fluctuations we set up a simple stochastic calculus and derive a natural martingale for option pricing from the wealth balance of options, stocks, and bonds. The resulting formula is evaluated for truncated L\'evy distributions.

Keywords

GAUSSIAN FLUCTUATIONS
NATURAL MARTINGALE
OPTION PRICING
PATH INTEGRAL
STOCHASTIC
TRUNCATED
PRICING
STOCKS

All Related Versions

Version 1, 2002-02-19, ArXiv
Published version: Physica A: Statistical Mechanics and its Applications, 312 (1-2), 217.

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