Black-Scholes Model Under Arithmetic Brownian Motion

  title={Black-Scholes Model Under Arithmetic Brownian Motion},
  author={Marek Kolman},
  journal={ERN: Other Econometrics: Econometric \& Statistical Methods - Special Topics (Topic)},
  • Marek Kolman
  • Published 22 December 2013
  • Mathematics
  • ERN: Other Econometrics: Econometric & Statistical Methods - Special Topics (Topic)
Usually, in the Black-Scholes world, it is assumed that a stock follows a Geometric Brownian motion. The aim of our research is to present Black-Scholes model in a world where the stock is attributed an Arithmetic Brownian motion. Although Arithmetic Brownian motion is simpler due to lack of the geometric terms, as it is shown the option model is eventually analytically less tractable than under Geometric Brownian motion. 
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