Simple Entropic Derivation of a Generalized Black-Scholes Option Pricing Model
Received: 19 January 2000 / Accepted: 24 March 2000 / Published: 4 April 2000
Cited by 19 | PDF Full-text (215 KB) | HTML Full-text | XML Full-text
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.