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A non-Gaussian option pricing model based on Kaniadakis exponential deformation

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Abstract

A way to make financial models effective is by letting them to represent the so called “fat tails”, i.e., extreme changes in stock prices that are regarded as almost impossible by the standard Gaussian distribution. In this article, the Kaniadakis deformation of the usual exponential function is used to define a random noise source in the dynamics of price processes capable of capturing such real market phenomena.

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Authors and Affiliations

  1. Dipartimento di Economia, Universià dell’Insubria, via Monte Generoso 71, 21100, Varese, Italy

    Enrico Moretto

  2. CNR-IMATI, via A. Corti 12, 20133, Milano, Italy

    Enrico Moretto, Sara Pasquali & Barbara Trivellato

  3. Dipartimento di Matematica, Politecnico di Torino, Corso Duca degli Abruzzi 24, 10129, Torino, Italy

    Barbara Trivellato

Authors
  1. Enrico Moretto
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  2. Sara Pasquali
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  3. Barbara Trivellato
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Correspondence to Enrico Moretto.

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Moretto, E., Pasquali, S. & Trivellato, B. A non-Gaussian option pricing model based on Kaniadakis exponential deformation. Eur. Phys. J. B 90, 179 (2017). https://doi.org/10.1140/epjb/e2017-80112-x

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  • DOI: https://doi.org/10.1140/epjb/e2017-80112-x

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