Consistency of the Geometric Brownian Motion Model of Stock Prices with Asymmetric Information

Abstract

This work is concentrated on the microeconomic foundation of modern option pricing models. We develop a model of market agents’ interactions, induced by heterogeneity of information, which is consistent with both modern option pricing models and empirical facts about stock price behavior. In particular, we focus on the connection between volatility and… (More)

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Cite this paper

@inproceedings{Carmona2007ConsistencyOT, title={Consistency of the Geometric Brownian Motion Model of Stock Prices with Asymmetric Information}, author={Ren{\'e} Carmona and Albina Danilova}, year={2007} }