Simple Entropic Derivation of a Generalized Black-Scholes Option Pricing Model
Michael J. Stutzer
Entropy · 2000
doi:10.3390/e2020070 (opens in a new tab)
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Abstract
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.
Abstract licence: CC BY
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