Monotonic transformation and recovering the implied stock price process

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Abstract

The paper demonstrates the construction of a stock price stochastic process that aligns with observed option prices, drawing inspiration from a manuscript by Professor Erio Castagnoli that employs the concept of a non-linear monotonic transformation of a standard Brownian motion. The paper includes a detailed numerical example that illustrates the implementation of this straightforward and ingenious idea.

Lingua originaleInglese
RivistaDecisions in Economics and Finance
DOI
Stato di pubblicazionePubblicato - 2024

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