A PATH INTEGRAL APPROACH TO DERIVATIVE SECURITY PRICING I: FORMALISM AND ANALYTICAL RESULTS

DOI10.1142/S0219024999000200zbMATH Open1153.91464arXivcond-mat/9901277MaRDI QIDQ3523536FDOQ3523536

S. Taddei, M. Rosa-Clot, Eleonora Bennati

Publication date: 3 September 2008

Published in: International Journal of Theoretical and Applied Finance (Search for Journal in Brave)

Abstract: We use a path integral approach for solving the stochastic equations underlying the financial markets, and we show the equivalence between the path integral and the usual SDE and PDE methods. We analyze both the one-dimensional and the multi-dimensional cases, with point dependent drift and volatility, and describe a covariant formulation which allows general changes of variables. Finally we apply the method to some economic models with analytical solutions. In particular, we evaluate the expectation value of functionals which correspond to quantities of financial interest.

Full work available at URL: https://arxiv.org/abs/cond-mat/9901277

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Mathematics Subject Classification ID

Stochastic partial differential equations (aspects of stochastic analysis) (60H15)

Cites Work

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• Dynamical Theory in Curved Spaces. I. A Review of the Classical and Quantum Action Principles
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