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Evolution process as an alternative to diffusion process and Black–Scholes Formula
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A. A. Pogorui
Published/Copyright:
May 29, 2009
Abstract
In this paper, we study the one-dimensional transport process in the case of disbalance. In the hydrodynamic limit, this process approximates the diffusion process on a line. By using this property, we propose to apply transport processes instead of diffusion processes in some economical models, particularly in Black–Scholes formula. This application manages to avoid some drawbacks of diffusion processes.
Key words.: Random evolutions; Black–Scholes formula; diffusion process; Brownian motion; transport process
Received: 2008-02-02
Published Online: 2009-05-29
Published in Print: 2009-May
© de Gruyter 2009
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- The asymptotic behaviour of the maximum of a random sample subject to trends in location and scale
- Evolution process as an alternative to diffusion process and Black–Scholes Formula
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Keywords for this article
Random evolutions;
Black–Scholes formula;
diffusion process;
Brownian motion;
transport process
Articles in the same Issue
- Semicircle law for random matrices of long-range percolation model
- The stochastic maximum principle in optimal control of degenerate diffusions with non-smooth coefficients
- The asymptotic behaviour of the maximum of a random sample subject to trends in location and scale
- Evolution process as an alternative to diffusion process and Black–Scholes Formula
- Occupation time problems for fractional Brownian motion and some other self-similar processes
- Properties of the distribution of the random variable defined by A2-continued fraction with independent elements
