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This is to the recent Black-Sholes thread

  • To: mathgroup at
  • Subject: [mg15221] This is to the recent Black-Sholes thread
  • From: Wiener <mswiener at>
  • Date: Tue, 22 Dec 1998 04:01:50 -0500
  • Sender: owner-wri-mathgroup at

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

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 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
>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

Zvi Wiener					Business School
e-mail: mswiener at		Hebrew University tel:
972-2-588-3049					Mount Scopus
fax: 972-2-588-1341				Jerusalem 91905	ISRAEL

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