A note on a generalized Black-Scholes formula
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.
|Date of creation:||20 Mar 2002|
|Date of revision:|
|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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