On a Final Value Problem connected with the B-S model
by
H.C. Jimbo
I.SM, Tokyo - Japan

We investigate a final value problem involving the B-S model. In [1] one way to extend the B-S model was proposed. Another way to do this is to validate the assumption of arbitrage opportunity or (and) stochastic interest rate. Following this idea, Illinski and Stepanenko [2] have proposed a new more flexible version of the B-S model and posed the asset pricing problem in term of Final Value problem (FVP). Also in [2] an approximate solution of the FVP was given not as usual in a functional integral form but in a Partial Differential Equation form. In this work we propose another approach based on the Green's Function.

Date received: March 18, 2003