Option pricing for a logstable asset price model

Hurst, Stephanie; Platen, Eckhard; Racherla, Deepti

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Option pricing for a logstable asset price model

Date

1999

Authors

Hurst, Stephanie

Platen, Eckhard

Racherla, Deepti

Publisher

Pergamon-Elsevier Ltd

Abstract

The paper generalises the celebrated Black and Scholes [1] European option pricing formula for a class of logstable asset price models. The theoretical option prices have the potential to explain the implied volatility smiles evident in the market.