Search results for "schole"
showing 4 items of 14 documents
European Option Pricing with Transaction Costs and Stochastic Volatility: an Asymptotic Analysis
2015
In this paper the valuation problem of a European call option in presence of both stochastic volatility and transaction costs is considered. In the limit of small transaction costs and fast mean reversion, an asymptotic expression for the option price is obtained. While the dominant term in the expansion it is shown to be the classical Black and Scholes solution, the correction terms appear at $O(\varepsilon^{1/2})$ and $O(\varepsilon)$. The optimal hedging strategy is then explicitly obtained for the Scott's model.
Evaluation of Options using the Black-Scholes Methodology
2019
This paper discusses how to obtain the Black-Scholes equation to evaluate options and how to obtain explicit solutions for Call and Put. The Black-Scholes equation, which is the basis for determining explicit solutions for Call and Put, is a rather sophisticated equation. It is a partial differential equation of the second order, parabolic, similar to the heat equation. The terms of the equation express diffusion in a homogeneous environment, convection and reaction. The main objective of the paper is to present the Black-Scholes methodology and apply this methodology on the underlying asset of the nature of the listed stock on the Bucharest Stock Exchange. Also, a secondary objective is to…