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A note on a generalized Black-Scholes formula

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  • Bakhodir A Ergashev

    (Washington University in St. Louis)

Abstract

A generalized Black-Scholes formula is presented for the case when the volatility part of the percentage changes in a stock price obeys a mean reverting Ornstein-Uhlenbeck process. When the parameter of the Ornstein-Uhlenbeck process converges to zero the generalized formula converges to the Black-Scholes formula.

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File URL: http://128.118.178.162/eps/fin/papers/0203/0203006.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0203006.

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Length: 5 pages
Date of creation: 20 Mar 2002
Date of revision:
Handle: RePEc:wpa:wuwpfi:0203006

Note: Type of Document - none; prepared on IBM PC - PC-TEX; to print on HP/PostScript/Franciscan monk; pages: 5 ; figures: none. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
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Web page: http://128.118.178.162

Related research

Keywords: Black_Scholes formula; Option pricing; Ornstein-Uhlenbeck processes;

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