New developments in econophysics: Option pricing formulas
Moawia Alghalith
TL;DR
This paper reviews recent advances in econophysics related to option pricing, introducing models with variable volatility and interest rates, and providing new closed-form formulas for American and Bermudan options.
Contribution
It introduces new option pricing formulas that relax traditional assumptions and apply Brownian motion, expanding the analytical tools in econophysics.
Findings
Derived closed-form formulas for American and Bermudan options.
Relaxed constant volatility and interest rate assumptions.
Utilized Brownian motion to model option prices.
Abstract
We synthesize and discuss some new developments in econophysics. In doing so, we focus on option pricing. We relax the assumptions of constant volatility and interest rate. In doing so, we rely on the square root of the Brownian motion. We also provide simple, closed-form pricing formulas for the American and Bermudan options.
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Taxonomy
Methods7 Fastest Ways to Call American Airlines Reservations Number (USA Guide)