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Definition of the coefficients in the stochastic differential model of price formation

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A. Burmistrov,  (Institute of Computational Mathematics and Mathematical Geophysics SB RAS, Novosibirsk Novosibirsk State University)

A. Novikov,  (Digital Ecosystems, Novosibirsk)

Series "Natural & Technical Sciences" # 03  2018
Stochastic differential model (SDM) of price formation proposed by the authors earlier describes the price changes more adequately than the classical price model, since it takes into account the random nature of the drift coefficient and the volatility of the asset prices. It is the equations for the drift and volatility together with equation for the price of the financial instrument itself form the system of stochastic differential equations (SDE). In this article, within the framework of the SDM, the coefficients of the SDE system are determined, with the help of which the asset prices are modeled.

Keywords: asset prices, stochastic differential equation, continuous distribution, stochastic volatility, drift.

 

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©  A. Burmistrov, A. Novikov, Journal "Modern science: actual problems of theory and practice".
 

 

 

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