This paper presents a unified method for closed-form pricing of European options on assets with diffusion prices, The method uses linear and nonlinear time and scale changes to reduce complex diffusion processes to known processes, thereby generating option pricing formulas for new diffusion...

This paper has two purposes. First, it integrates the results that are currently available by presenting a unified method for establishing explicit option pricing formulae. It also thereby demonstrates a common link that connects these results and simplifies their derivation. Second, it derives...

The EMH is actually two hypotheses; the martingale and the sub-martingale hypothesis. This paper shows that in attempting to distinguish between these hypotheses, taking logs of prices before first· differencing implies that tests based upon the first-order serial correlation coefficient lose...

Recent results have characterized the class of continuous sample path stochastic processes admissible as equilibrium price processes in a frictionless, continuous trading market under a no arbitrage equilibrium. These results are not complete since the role of the Markov assumption, made by all...

Why is risk-neutral valuation (RNV), after all this time, still so hard to understand? Many have a hard time understanding, and therefore accepting the concept. This paper seeks to clarify the issue by interpreting some of the insights provided by the fundamental theorems of asset pricing, while...

I introduce an economically viable total error measure appropriate for American put option pricing algorithms which incorporates both pure pricing error and early exercise error. A rational option pricing result that motivates the pure pricing error is derived. Early exercise error is motivated...