Open AccessExistence of Maximum Entropy Problem Solution in a General N-Dimensional Case
Author(s) -
Ruben Gevorgyan,
Նարեկ Դավիթի Մարգարյան
Publication year - 2018
Publication title -
mathematical problems of computer science
Language(s) - English
Resource type - Journals
eISSN - 2738-2788
pISSN - 2579-2784
DOI - 10.51408/1963-0012
Subject(s) - principle of maximum entropy , entropy (arrow of time) , mathematical optimization , mathematics , range (aeronautics) , boundary value problem , mathematical economics , mathematical analysis , physics , thermodynamics , statistics , engineering , aerospace engineering
In the following paper, we will define conditions, which need to be satisfied in order for the maximum entropy problem applied in European call options to have a solution in a general n-dimensional case. We will also find a minimum right boundary for the price range in order to have at least one risk neutral measure satisfying the option pricing formula. The results significantly reduce the computational time of optimization algorithms used in maximum entropy problem.