Fri, 09 May 2008
14:15
14:15
DH 1st floor SR
The Black-Scholes and Dupire formulae interpreted in terms of Brownian last hitting times
Amel Bentata and Marc Yor
(Paris 6)
Abstract
14.15 - 15.00 Part I
Marc Yor : The infinite horizon case.
15.00 - 15.15 A short break for questions and answers
15.15 - 16.00 Part II
Amel Bentata : The finite horizon case.
Roughly, the Black-Scholes formula is a distribution function of the maturity. This may be explained in terms of the last passage times at a given level of the underlying Brownian motion with drift.
Conversely, starting with last passage times up to finite horizon, we obtain a 2-parameter variant of the Black-Scholes formula.