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Entropy 2000, 2(2), 70-77; https://doi.org/10.3390/e2020070

Simple Entropic Derivation of a Generalized Black-Scholes Option Pricing Model

Dept. of Finance, 108 PBAB, Univ. of Iowa, Iowa City, IA., USA
Received: 19 January 2000 / Accepted: 24 March 2000 / Published: 4 April 2000
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Abstract

A straightforward derivation of the celebrated Black-Scholes Option Pricing model is obtained by solution of a simple constrained minimization of relative entropy. The derivation leads to a natural generalization of it, which is consistent with some evidence from stock index option markets. View Full-Text
Keywords: option pricing; entropic martingale measure; Black-Scholes; asset pricing option pricing; entropic martingale measure; Black-Scholes; asset pricing
This is an open access article distributed under the Creative Commons Attribution License (CC BY 3.0).

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Stutzer, M.J. Simple Entropic Derivation of a Generalized Black-Scholes Option Pricing Model. Entropy 2000, 2, 70-77.

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