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Some Applications of Log-Ergodic Processes: Ergodic Trading Model and Call Option Pricing Using the Irrational Rotation

Year: 2024

Type: preprint

Abstract: Due to the increasing popularity of futures trading among financial market participants, the risk management of these instruments is crucial. In this paper, we introduce a model for estimating the ideal time for leaving a trading position on a stock. Also, using ergodic theorems, we investigate the European call option pricing problem using a stochastic irrational rotation on the unit circle. Utilizing the properties of log-ergodic processes, we use the time average of the stochastic process of risky assets instead of expectations in our calculations.

Source: arXiv (Cornell University)

DOI: 10.48550/arxiv.2410.22054

Authors: Firouzi, Kiarash, Mamaghani, Mohammad Jelodari

Institution: Allameh Tabataba'i University

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

OpenAlex ID: W7125916382

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