2010•College MathematicsRequires access

Comparison of the Two Pricing on Bi-Direction European Stock Option

Yan Hai-feng

Abstract

Under the hypothesis of stock price submitting to Poisson type jump process model,we obtain two pricing formulas of Bi-direction European option by using actuarial and no-arbitrage pricing approach respectively in this paper.Then,by making a comparison between two formulas,we find that these two pricing formulas are same when stock price submits to the special Poisson type jump process model.

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Key concepts: Poisson process, Mathematics, Poisson distribution, Jump, Valuation of options, Finite difference methods for option pricing, Econometrics, Arbitrage