Stochastic Processes in Pricing Financial Derivatives
A special issue of Entropy (ISSN 1099-4300). This special issue belongs to the section "Information Theory, Probability and Statistics".
Deadline for manuscript submissions: 31 December 2026 | Viewed by 1395
Editors
Interests: computation and stochastic modelling in finance and insurance; financial mathematics; insurance mathematics; stochastic analysis; stochastic integration; probability; measure theory; fuzzy sets theory; statistics
Special Issue Information
Dear Colleagues,
Modeling financial instrument prices using stochastic processes has become a significant issue since the historic breakthrough made by Black and Scholes, who used geometric Brownian motion as a price model of the underlying financial instrument to value European options. Further research on financial markets resulted in the conclusion that the Black–Scholes model, although providing a convenient pricing formula, does not accurately reflect market reality. This fact led to the development of subsequent financial instrument models, among which exponential Lévy processes—generalizations of geometric Brownian motion—played a significant role. Lévy processes, in contrast to geometric Brownian motion, allow for the modelling of jumps in the price of the underlying asset, which makes stochastic modelling more realistic. Recently, even more complex stochastic processes, including those that do not fall within the class of semimartingales, have been employed as models for the derivative pricing problem. Moreover, some very sophisticated methods have also been developed to address pricing financial derivatives, such as the application of the Dupire formula.
Here, we collect new approaches to the broadly understood field of modeling and pricing financial derivatives. In particular, purely theoretical papers within the abovementioned field are welcome.
Dr. Piotr Nowak
Prof. Dr. Dariusz Gątarek
Guest Editors
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Keywords
- financial derivatives pricing
- Black–Scholes model
- stochastic processes
- Lévy processes
- semimartingales
- Dupire formula
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