Relativistic Black-Scholes model

Maciej Trzetrzelewski

Papers from arXiv.org

Abstract: Black-Scholes equation, after a certain coordinate transformation, is equivalent to the heat equation. On the other hand the relativistic extension of the latter, the telegraphers equation, can be derived from the Euclidean version of the Dirac equation. Therefore the relativistic extension of the Black-Scholes model follows from relativistic quantum mechanics quite naturally. We investigate this particular model for the case of European vanilla options. Due to the notion of locality incorporated in this way one finds that the volatility frown-like effect appears when comparing to the original Black-Scholes model.

Date: 2013-07, Revised 2018-02
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in EPL (Europhysics Letters), Volume 117, Number 3, 2017

Downloads: (external link)
http://arxiv.org/pdf/1307.5122 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1307.5122

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().