Black-Scholes Option Pricing Model Modified to Admit a Miniscule Drift Can Reproduce the Volatility

• 作 者: Matthew C. Modisett James A. P
• 机 构: DepartmentofMathematicsandStatistics,FinancialGuardLtd.
• 出 处: 应用数学(英文)
• 发表日期: 2012年6期
• 关键词: OPTION PRICING BLACK-SCHOLES VOLATILITY SMILE Option Pricing Black-Scholes Volat

This paper develops a closed-form solution to an extended Black-Scholes (EBS) pricing formula which admits an implied drift parameter alongside the standard implied volatility. The market volatility smiles for vanilla call options on the S&P 500 index