A General Theory of Option Pricing: Explicit, simple Formulas

20 Pages Posted: 29 Apr 2021 Last revised: 29 Nov 2021

See all articles by Moawia Alghalith

Moawia Alghalith

University of the West Indies (UWI)

Date Written: April 28, 2021

Abstract

We provide simple, explicit price formulas for both the European and American options. These formulas do not require any numerical/computational methods. Moreover, we provide these formulas under
stochastic volatility, stochastic interest rate, and simultaneous stochastic
volatility and stochastic interest rate. Furthermore, we relax the normality and hedging (complete markets) assumptions

Keywords: European option, American option, stochastic volatility, stochastic interest rate, jump-diffusion

JEL Classification: G00

Suggested Citation

Alghalith, Moawia, A General Theory of Option Pricing: Explicit, simple Formulas (April 28, 2021). Available at SSRN: https://ssrn.com/abstract=3836033 or http://dx.doi.org/10.2139/ssrn.3836033

Moawia Alghalith (Contact Author)

University of the West Indies (UWI) ( email )

Trinidad and Tobago

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