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Xin-Li-810J

# Xin-Li-810J - Option Pricing formula based on a Non...

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Option Pricing formula based on a Non-Gaussian  Option Pricing formula based on a Non-Gaussian  Stock Price Model Stock Price Model     Xin Li Xin Li Physics Department, NC State Univ. Physics Department, NC State Univ.

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Preliminary result of Option Pricing Partial differential Equation based on log-normal distribution Derivation of price of European call option based on log-normal  distribution Introduction to Volatility smile Tsallis Stock Price model Tsallis distribution Derivation of Partial differential Equation and stock price based  on Tsallis distribution Derivation of option pricing formula based on Tsallis distribution   Empirical Result of the Tsallis Stock model Topic OutLine  Topic OutLine
Preliminary result of Option pricing Preliminary result of Option pricing Partial differential equation of european call option [1] dS Sdt Sd μ σ ϖ = + (1) 2 2 2 2 1 ( ) 2 f f f f df S S dt S d t S S S μ σ σ ϖ = + + + Consider a Portfolio short 1 option and buy share, then after time interval the price change of the portfolio must equal to risk-neutral increase which leads to: f S S S t 2 2 2 2 1 2 f f f rS S rf t S S σ + + = 2 2 2 2 1 ( ) ( ) 2 f f f f f f f S S S t S t r f S t S t S S S S

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Xin-Li-810J - Option Pricing formula based on a Non...

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