Exploring Dynamic Asset Pricing within Bachelier Market Model

Paper: arXiv 2307.04059

Authors: Nancy Asare Nyarko, Bhathiya Divelgama, Jagdish Gnawali, Blessing Omotade, Svetlozar Rachev, Peter Yegon

Abstract

This paper delves into the dynamics of asset pricing within Bachelier market model, elucidating the representation of risky asset price dynamics and the definition of riskless assets.

Complexity vs Empirical Score

• Math Complexity: 6.5/10
• Empirical Rigor: 2.5/10
• Quadrant: Lab Rats — theoretically deep, empirically untested

Why this score: The paper provides a formal mathematical analysis of asset pricing dynamics using the continuous-time Bachelier framework. However, it is primarily theoretical with minimal empirical validation, limiting its immediate practical application and reproducibility.

Research Flowchart

  flowchart TD
    A["Research Goal: Explore Dynamic Asset Pricing in Bachelier Model"] --> B["Inputs: Normal Distribution Assumptions & Riskless Asset Defs"]
    B --> C["Model Formulation: Formulate Risky Asset Dynamics"]
    C --> D["Theoretical Derivations & Measure Changes"]
    D --> E["Key Findings: Closed-Form Pricing Formulae & Risk Dynamics"]