On the Applicability of the Black-Scholes Model to the Inverse Quantity of Price (Under Peer-Review)

Hiroki Tahara
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Hiroki Tahara: Jan Academy

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Abstract: The aim of this article is to prove the applicability of the Black-Scholes model to the inverse quantity of price, which is the generalization of the applicability of the model to foreign currency. This issue can be formulated as the discussion whether there exists the set of real numbers as the drift and the volatility about the inverse quantity satisfying a certain system of stochastic differential equations. Solving the equations in terms of such real numbers reveals not only the existence but also that the expression is uniquely determined and has a very beautiful symmetry.

Date: 2020-04-28
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Persistent link: https://EconPapers.repec.org/RePEc:osf:osfxxx:fgnca

DOI: 10.31219/osf.io/fgnca

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