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Article: Option pricing with Weyl-Titchmarsh theory

TitleOption pricing with Weyl-Titchmarsh theory
Authors
Issue Date2004
PublisherRoutledge. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/14697688.asp
Citation
Quantitative Finance, 2004, v. 4 n. 4, p. 457-464 How to Cite?
AbstractIn the Black-Merton-Scholes framework, the price of an underlying asset is assumed to follow a pure diffusion process. No-arbitrage theory shows that the price of an option contract written on the asset can be determined by solving a linear diffusion equation with variable coefficients. Applying the separating variable method, the problem of option pricing under state-dependent deterministic volatility can be transformed into a Schrödinger spectral problem, which has been well studied in quantum mechanics. With Weyl-Titchmarsh theory, we are able to determine the boundary condition and the nature of the eigenvalues and eigenfunctions. The solution can be written analytically in a Stieltjes integral. A few case studies demonstrate that a new analytical option pricing formula can be produced with our method.
Persistent Identifierhttp://hdl.handle.net/10722/85585
ISSN
2015 Impact Factor: 0.794
2015 SCImago Journal Rankings: 0.565
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorLi, Yen_HK
dc.contributor.authorZhang, JEen_HK
dc.date.accessioned2010-09-06T09:06:52Z-
dc.date.available2010-09-06T09:06:52Z-
dc.date.issued2004en_HK
dc.identifier.citationQuantitative Finance, 2004, v. 4 n. 4, p. 457-464en_HK
dc.identifier.issn1469-7688en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85585-
dc.description.abstractIn the Black-Merton-Scholes framework, the price of an underlying asset is assumed to follow a pure diffusion process. No-arbitrage theory shows that the price of an option contract written on the asset can be determined by solving a linear diffusion equation with variable coefficients. Applying the separating variable method, the problem of option pricing under state-dependent deterministic volatility can be transformed into a Schrödinger spectral problem, which has been well studied in quantum mechanics. With Weyl-Titchmarsh theory, we are able to determine the boundary condition and the nature of the eigenvalues and eigenfunctions. The solution can be written analytically in a Stieltjes integral. A few case studies demonstrate that a new analytical option pricing formula can be produced with our method.en_HK
dc.languageengen_HK
dc.publisherRoutledge. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/14697688.aspen_HK
dc.relation.ispartofQuantitative Financeen_HK
dc.titleOption pricing with Weyl-Titchmarsh theoryen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=1469-7688&volume=4&issue=4&spage=457&epage=464&date=2004&atitle=Option+Pricing+with+Weyl-Titchmarsh+Theoryen_HK
dc.identifier.emailZhang, JE: jinzhang@hku.hken_HK
dc.identifier.authorityZhang, JE=rp01125en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1080/14697680400008643en_HK
dc.identifier.scopuseid_2-s2.0-11344251743en_HK
dc.identifier.hkuros117275en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-11344251743&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume4en_HK
dc.identifier.issue4en_HK
dc.identifier.spage457en_HK
dc.identifier.epage464en_HK
dc.identifier.isiWOS:000233071400008-
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridLi, Y=14826895200en_HK
dc.identifier.scopusauthoridZhang, JE=7601346659en_HK
dc.identifier.citeulike98135-

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