An important determinant of option prices is the elasticity of the pricing kernel used to price all claims in the economy. In this paper, we rst show that for a given forward price of the underlying asset, option prices are higher when the elasticity of the pricing kernel is declining than when it is constant. We then investigate the implications of the elasticity of the pricing kernel for the ...

In this article, we propose a numerical algorithm for computing price of discrete single and double barrier option under the emph{Black-Scholes} model. In virtue of some general transformations, the partial differential equations of option pricing in different monitoring dates are converted into simple diffusion equations. The present method is fast compared to alterna...

This work provides an application of wavelet analysis to pricing and hedging path–dependent contingent claims within the framework of the Black–Scholes model.

The story of this theorem started like most of modern Mathematical Finance with the work of F. Black, M. Scholes [3] and R. Merton [25]. These authors consider a model S = (St)0≤t≤T of geometric Brownian motion proposed by P. Samuelson [30], which today is widely known under the name of Black–Scholes model. Presumably every reader of this article is familiar with the by now wellknown technique ...

Option trading forms part of our financial markets. A traded option gives to its owner the right to buy (call option) or to sell (put option) a fixed quantity of assets of a specified stock at a fixed price (exercise or strike price). There are two major types of traded options. One is the American option that can be exercised at any time prior to its expiry date, and the other option, which ca...

Stochastic differential equations (SDEs) and the Kolmogorov partial (PDEs) associated to them have been widely used in models from engineering, finance, natural sciences. In particular, SDEs PDEs, respectively, are highly employed for approximative pricing of financial derivatives. PDEs SDEs, can typically not be solved explicitly it has still is an active topic research design analyze numerica...

BSM was never equipped to face an options market. The formula doesn't know what market is and even less so the meaning of inverting implying volatility from option price could possibly be.