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On one inverse problem in financial mathematics

The Black-Scholes formula has been derived under the assumption of constant volatility in stocks. In spite of evidence that this parameter is not constant, this formula is widely used by financial markets. This talk addresses the question of whether a model for stock price exists such that the Black-Scholes and Bachelier formulae hold while the volatility is non-constant. Joint work with Fima Klebaner.

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