%0 Journal Article
%T A Delayed Black and Scholes Formula I
%A Mercedes Arriojas
%A Yaozhong Hu
%A Salah-Eldin Mohammed
%A Gyula Pap
%J Mathematics
%D 2006
%I arXiv
%X In this article we develop an explicit formula for pricing European options when the underlying stock price follows a non-linear stochastic differential delay equation (sdde). We believe that the proposed model is sufficiently flexible to fit real market data, and is yet simple enough to allow for a closed-form representation of the option price. Furthermore, the model maintains the no-arbitrage property and the completeness of the market. The derivation of the option-pricing formula is based on an equivalent martingale measure.
%U http://arxiv.org/abs/math/0604640v1