journal article
oaidoi:10.1016/j.matpur.2006.04.006

Towards a self-consistent theory of volatility

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Publication date
31 December 2006
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Published by Elsevier Masson SAS
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    Abstract

    AbstractIn this paper, we propose a new theory for the formation of volatility which takes into account the influence of option hedging on the assets price dynamics. By analogy with statistical mechanics, we build a self-consistent equation for the volatility, we show it is well-posed and we explain how it can be solved

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