This is to the recent Black-Sholes thread

*To*: mathgroup at smc.vnet.net*Subject*: [mg15221] This is to the recent Black-Sholes thread*From*: Wiener <mswiener at mscc.huji.ac.il>*Date*: Tue, 22 Dec 1998 04:01:50 -0500*Sender*: owner-wri-mathgroup at wolfram.com

There is a transformation which reduces almost every diffusion process to an arithmetical Brownian Motion or to the Geometrical Brownian Motion (the original Black-Scholes-Merton model). Details of this transformation can be found in my paper "The Analysis of Deltas, State Prices and VAR: A New Approach" downloadable from http://pluto.mscc.huji.ac.il/~mswiener/research/research.htm This is not a simple way, but it is very general and there are some examples in the paper as well. Zvi Wiener. In a message dated 12/12/98 5:58:57 AM, gauy at videotron.ca writes: >The famous Black-Sholes solution for pricing derivative is based on the >assumption that the log of price returns are normally distributed. Now >suppose that the distribution of stock price returns is not normaly >distributed as many authors suggest. This would meen that we have to >derive a new equation for the derivative taking into account this other >distribution. > >Also suppose you have another distribution to investigate. How someone >could approch this problem to find a solution ? > >I'm using Mathematica to do math stuff but I'm not an expert in >mathematics. > ****************************************************************** Zvi Wiener Business School e-mail: mswiener at mscc.huji.ac.il Hebrew University tel: 972-2-588-3049 Mount Scopus fax: 972-2-588-1341 Jerusalem 91905 http://pluto.huji.ac.il/~mswiener/zvi.html ISRAEL ******************************************************************