Asymptotic Analysis of Option Pricing Functions

Archil Gulisashvili
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Archil Gulisashvili: Ohio University

Chapter Chapter 8 in Analytically Tractable Stochastic Stock Price Models, 2012, pp 227-242 from Springer

Abstract: Abstract This chapter introduces call and put pricing functions in general asset price models. The chapter first takes up the question of what are the conditions under which a function of two variables (strike price and maturity) is a call pricing function. The answer to this question is given in the form of a characterization theorem for general call pricing functions. The best known call pricing function is without doubt the pricing function in the Black-Scholes model. This celebrated model is discussed in the present chapter and an analytical proof of the Black-Scholes formula is given. Moreover, sharp asymptotic formulas are obtained for call pricing functions in the Hull-White, Stein-Stein, and Heston models.

Keywords: Asset Price; Option Price; Price Function; Stochastic Volatility Model; Scholes Model (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprfcp:978-3-642-31214-4_8

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DOI: 10.1007/978-3-642-31214-4_8

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