Option Pricing Based on Modified Advection-Dispersion Equation: Stochastic Representation and Applications
Joint Authors
Source
Discrete Dynamics in Nature and Society
Issue
Vol. 2020, Issue 2020 (31 Dec. 2020), pp.1-8, 8 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2020-03-12
Country of Publication
Egypt
No. of Pages
8
Main Subjects
Abstract EN
In this paper, we first investigate the stochastic representation of the modified advection-dispersion equation, which is proved to be a subordinated stochastic process.
Taking advantage of this result, we get the analytical solution and mean square displacement for the equation.
Then, applying the subordinated Brownian motion into the option pricing problem, we obtain the closed-form pricing formula for the European option, when the underlying of the option contract is supposed to be driven by the subordinated geometric Brownian motion.
At last, we compare the obtained option pricing models with the classical Black–Scholes ones.
American Psychological Association (APA)
Lv, Longjin& Wang, Luna. 2020. Option Pricing Based on Modified Advection-Dispersion Equation: Stochastic Representation and Applications. Discrete Dynamics in Nature and Society،Vol. 2020, no. 2020, pp.1-8.
https://search.emarefa.net/detail/BIM-1153383
Modern Language Association (MLA)
Lv, Longjin& Wang, Luna. Option Pricing Based on Modified Advection-Dispersion Equation: Stochastic Representation and Applications. Discrete Dynamics in Nature and Society No. 2020 (2020), pp.1-8.
https://search.emarefa.net/detail/BIM-1153383
American Medical Association (AMA)
Lv, Longjin& Wang, Luna. Option Pricing Based on Modified Advection-Dispersion Equation: Stochastic Representation and Applications. Discrete Dynamics in Nature and Society. 2020. Vol. 2020, no. 2020, pp.1-8.
https://search.emarefa.net/detail/BIM-1153383
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1153383