Option Valuation Under the Effect of Time Dilation
5 Pages Posted: 18 Jan 2016
Date Written: January 17, 2016
110 years ago, Einstein published his Theory of Special Relativity. In this thought experiment, we introduce Einstein’s idea of time dilation to option valuation. We analyse the effect of time dilation on the time decay of an European long call option.
Keywords: Black Scholes, Einstein, Time Dilation
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