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

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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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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Keywords

  • Statistical and Nonlinear Physics