Computing the Constant Elasticity of Variance Option Pricing Formula
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- Author(s): MARK SCHRODER
- Published: Apr 30, 2012
- Pages: 211-219
- DOI: 10.1111/j.1540-6261.1989.tb02414.x
This paper expresses the constant elasticity of variance option pricing formula in terms of the noncentral chi‐square distribution. This allows the application of well‐known approximation formulas and the derivation of a whole class of closed‐form solutions. In addition, a simple and efficient algorithm for computing this distribution is presented.