A Novel Simple but Empirically Consistent Model for Stock Price and Option Pricing
Huadong (Henry) Pang
J.P. Morgan Chase & Co., Quantitative Research
July 15, 2009
In this paper, we propose a simple but empirically consistent stochastic model for stock price dynamics and option pricing, which not only has the same analyticity as log-normal and Black-Scholes model, but is also consistent with many phenomenons arising from empirical stock and option markets. It is another way to model stock price and options under leptokurtic distribution that hopefully can add some new insight or give new ideas to improve stock and option valuation.
Number of Pages in PDF File: 21
Keywords: Nonlinear model, Random walk, Stock price, Option pricing, Default risk, Realized volatility, Local volatility, Volatility skew, EGARCH
JEL Classification: G12, G1, C51, C5
Date posted: April 10, 2009 ; Last revised: July 15, 2009
© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo8 in 0.297 seconds