Option Pricing Based on Modified Advection-Dispersion Equation: Stochastic Representation and Applications

<div>Comparison between the real call option prices with the one obtained by different models under different strike prices <i>K</i>. Here, BS price stands for the price obtained by the classical Black–Scholes model, and <i>α</i>-BS stands for the price obtained by formula (<a href="https://static-preview.hindawi.com/articles/ddns/volume-2020/7168571/figures/#EEq26">26</a>) with <span class="nowrap"><svg height="8.55521pt" id="M206" style="vertical-align:-0.2063904pt" version="1.1" viewbox="-0.0498162 -8.34882 37.9365 8.55521" width="37.9365pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M545 106L524 126C493 85 467 65 455 65C438 65 427 113 405 238C448 295 498 362 543 439L533 448L478 435C453 386 423 331 398 295H395C370 404 347 448 282 448C169 448 23 309 23 153C23 54 65 -12 128 -12C203 -12 283 70 339 155H341C360 29 380 -12 411 -12C444 -12 491 11 545 106ZM333 204C265 95 210 54 169 54C137 54 113 96 113 171C113 302 191 405 252 405C301 405 318 306 333 204Z"></path></g><g transform="matrix(.013,0,0,-0.013,11.017,0)"><path d="M535 323V373H52V323H535ZM535 138V188H52V138H535Z"></path></g><g transform="matrix(.013,0,0,-0.013,22.28,0)"><path d="M241 635C89 635 35 457 35 312C35 153 89 -12 240 -12C390 -12 443 166 443 312C443 466 390 635 241 635ZM238 602C329 602 354 454 354 312C354 172 330 22 240 22C152 22 124 173 124 313S148 602 238 602Z"></path></g><g transform="matrix(.013,0,0,-0.013,28.52,0)"><path d="M113 -12C146 -12 170 11 170 46C170 78 146 103 114 103S58 78 58 46C58 11 82 -12 113 -12Z"></path></g><g transform="matrix(.013,0,0,-0.013,31.484,0)"><path d="M384 0V27C293 34 287 42 287 114V635C232 613 172 594 109 583V559L157 557C201 555 205 550 205 499V114C205 42 199 34 109 27V0H384Z"></path></g></svg>.</span></div>

Discrete Dynamics in Nature and Society

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Figure 4

Figure 4: Option Pricing Based on Modified Advection-Dispersion Equation: Stochastic Representation and Applications 