The effect of non-ideal market conditions on option pricing

摘要

Option pricing is mainly based on ideal market conditions which are wellrepresented by the Geometric Brownian Motion (GBM) as market model. We studythe effect of non-ideal market conditions on the price of the option. We focusour attention on two crucial aspects appearing in real markets: The influenceof heavy tails and the effect of colored noise. We will see that both effectshave opposite consequences on option pricing.