New Method to Option Pricing for the General Black-Scholes Model-An Acturarial Approach

YAN Hai-feng; LIU San-yang

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Article Navigation > Applied Mathematics and Mechanics > 2003 > 24(7): 730-738

YAN Hai-feng, LIU San-yang. New Method to Option Pricing for the General Black-Scholes Model-An Acturarial Approach[J]. Applied Mathematics and Mechanics, 2003, 24(7): 730-738.

Citation:

YAN Hai-feng, LIU San-yang. New Method to Option Pricing for the General Black-Scholes Model-An Acturarial Approach[J]. Applied Mathematics and Mechanics, 2003, 24(7): 730-738.

Citation:

YAN Hai-feng, LIU San-yang. New Method to Option Pricing for the General Black-Scholes Model-An Acturarial Approach[J]. Applied Mathematics and Mechanics, 2003, 24(7): 730-738.

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New Method to Option Pricing for the General Black-Scholes Model-An Acturarial Approach

YAN Hai-feng^1,2,
LIU San-yang¹

1.
Department of Applied Mathematics, Xidian University, Xi'an 710071, P. R. China;
2.
Department of Mathematics, Henan Normal University, Xinxiang, Henan 453002, P. R. China

Received Date: 2002-01-16
Rev Recd Date: 2003-03-13
Publish Date: 2003-07-15

Abstract

Abstract

Using physical probability measure of price process and the principle of fair premium,the results of Mogens Bladt and Hina Hviid Rydberg are generalized.In two cases of paying intermediate divisends and no intermediate dividends,the Black-Scholes model is generalized to the case where the riskless asset(bond or bank account) earns a time-dependent interest rate and risky asset(stock) has time-dependent the continuously compounding expected rate of return,volatility.In these cases the accurate pricing formula and put-call parity of European option are obtained.The general approach of option pricing is given for the general Black-Scholes of the risk asset(stock) with a stochastic continuously compounding expected rate of return,volatility.The accurate pricing formula and put-call parity of European option on a stock whose price process is driven by general Ornstein-Uhlenback process are given by actuarial approach.
- option pricing,
- Black-Scholes model,
- fair premium,
- O-U process

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References(10)

References

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