Pricing rule based on non-arbitrage arguments for random volatility and volatility smile

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dc.creatorDokuchaev, Nikolai
dc.date2002-05-10
dc.date.accessioned2026-07-07T12:07:12Z
dc.date.available2026-07-07T12:07:12Z
dc.descriptionWe consider a generic market model with a single stock and with random volatility. We assume that there is a number of tradable options for that stock with different strike prices. The paper states the problem of finding a pricing rule that gives Black-Scholes price for at-money options and such that the market is arbitrage free for any number of tradable options, even if there are two Brownian motions only: one drives the stock price, the other drives the volatility process. This problem is reduced to solving a parabolic equation.
dc.description18 pages
dc.identifierhttps://arxiv.org/abs/math/0205120
dc.identifierhttp://arxiv.org/abs/math/0205120
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/208890
dc.subjectProbability
dc.subjectOptimization and Control
dc.subjectPricing of Securities
dc.titlePricing rule based on non-arbitrage arguments for random volatility and volatility smile
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