Option pricing on multiple assets

DOI10.1007/S10440-006-9069-7MaRDI QIDQ852003zbMATH OpenOpenAlexFDO

Authors Thomas Branson, Yang Ho Choi

Publication date 27 November 2006

Published in Acta Applicandae Mathematicae (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1007/s10440-006-9069-7

zbMATH Keywords

curvature arbitrageheat kernel asymptoticsmultiple assetsOption pricing

Mathematics Subject Classification ID

Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Derivative securities (option pricing, hedging, etc.) (91G20)

Review text

The paper combines ideas from stochastic differential equations and from geometry in the study of a multidimensional version of the Black-Scholes equations from mathematical economics. The approach is motivated by the need to introduce geometric invariants in the study of the multi-dimensional case, as the variable configurations in particular models naturally form non-linear manifold structures. Some basic assumptions are made, for example, short selling is permitted and the assets are divisible. After the authors consider the simplest model in the multiple asset case, the more elegant one is proposed which is called curvature arbitrage model. The purpose of the paper is threefold: the systematic approach to the multi-dimensional Black-Scholes equation is given, two fundamental curvature invariants from geometry are introduced and time asymptotics of the multi-dimensional Black-Scholes equation with the use of heat equation asymptotics.

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• scientific article; zbMATH DE number 6452941
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Cites work

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Cited in

(10)

• Operator trigonometry of multivariate finance
• Multi-asset Black-Scholes model as a variable second class constrained dynamical system
• Fourier inversion formulas for multiple-asset option pricing
• scientific article; zbMATH DE number 5283783 (Why is no real title available?)
• Multi-asset American options and parallel quantization
• scientific article; zbMATH DE number 1302646 (Why is no real title available?)
• scientific article; zbMATH DE number 6452941 (Why is no real title available?)
• Derivation of multi-asset Black-Scholes differential equations
• The Black–Scholes equation in the presence of arbitrage
• Option valuation with co-integrated asset prices

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