α-Stochastic Differential Equations and Option Pricing Model

  • L. Belkacem
Conference paper


This paper develops a numerical model for option pricing under the hypothesis that the underlying asset price satisfies a stochastic differential equation driven by an α-stable Lévy motion. We feed this model with simulated European call option prices and use it to explain the skewed “smile effect” of the implied volatility.


Stock Return Option Price Call Option Implied Volatility Stochastic Volatility Model 
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Copyright information

© Springer-Verlag London Limited 1997

Authors and Affiliations

  • L. Belkacem
    • 1
  1. 1.INRIA - Groupe FractalesLe Chesnay CedexFrance

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