Option pricing from path integral for non-Gaussian fluctuations. Natural martingale and application to truncated Lèvy distributions

Hagen Kleinert

Physica A: Statistical Mechanics and its Applications, 2002, vol. 312, issue 1, 217-242

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 Lèvy distributions.

Date: 2002
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:312:y:2002:i:1:p:217-242

DOI: 10.1016/S0378-4371(02)00839-7

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