Computing the Constant Elasticity of Variance Option Pricing Formula

1989318 citationsJournal Article

Authors

Mark Schröder · Prudential Financial (United States)

Abstract

ABSTRACT This paper expresses the constant elasticity of variance option pricing formula in terms of the noncentral chi‐square distribution. This allows the application of well‐known approximation formulas and the derivation of a whole class of closed‐form solutions. In addition, a simple and efficient algorithm for computing this distribution is presented.

Topics & Keywords

Stochastic processes and financial applications Financial Risk and Volatility Modeling Capital Investment and Risk Analysis

UN Sustainable Development Goals

Partnerships for the goals

Publication Details

Published in: The Journal of Finance

Volume 44, Issue 1, pp. 211-219

DOI: 10.1111/j.1540-6261.1989.tb02414.x

Field-Weighted Citation Impact: 0.66