Entropy 2000, 2(2), 70-77; doi:10.3390/e2020070
Article

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
PDF Full-text Download PDF Full-Text [215 KB, uploaded 16 September 2008 11:01 CEST]
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.
Keywords: option pricing; entropic martingale measure; Black-Scholes; asset pricing

Article Statistics

Load and display the download statistics.

Citations to this Article

Cite This Article

MDPI and ACS Style

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

AMA Style

Stutzer MJ. Simple Entropic Derivation of a Generalized Black-Scholes Option Pricing Model. Entropy. 2000; 2(2):70-77.

Chicago/Turabian Style

Stutzer, Michael J. 2000. "Simple Entropic Derivation of a Generalized Black-Scholes Option Pricing Model." Entropy 2, no. 2: 70-77.

Entropy EISSN 1099-4300 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert