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Option Pricing from Path Integral for Non-Gaussian Fluctuations. Natural Martingale and Application to Truncated Lévy Distributions

Hagen Kleinert
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Abstract

Within a path integral formalism for non-Gaussian price fluctuations we set up a simple stochastic calculus and derive a natural martingale for option pricing from the wealth balance of options, stocks, and bonds. The resulting formula is evaluated for truncated Lévy distributions.

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Hagen Kleinert. 2002-02-19. Option Pricing from Path Integral for Non-Gaussian Fluctuations. Natural Martingale and Application to Truncated Lévy Distributions. https://doi.org/10.1016/s0378-4371(02)00839-7

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