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Monotonic transformation and recovering the implied stock price process

Fusai, G. ORCID: 0000-0001-9215-2586 (2024). Monotonic transformation and recovering the implied stock price process. Decisions in Economics and Finance, doi: 10.1007/s10203-024-00447-z


The paper demonstrates the construction of a stock price stochastic process that aligns with observed option prices, drawing inspiration from a manuscript by Professor Erio Castagnoli that employs the concept of a non-linear monotonic transformation of a standard Brownian motion. The paper includes a detailed numerical example that illustrates the implementation of this straightforward and ingenious idea.

Publication Type: Article
Additional Information: This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit
Publisher Keywords: Brownian motion, Implied volatility surface, Monte Carlo simulation, Black-Scholes model
Subjects: H Social Sciences > HF Commerce
H Social Sciences > HG Finance
Departments: Bayes Business School
Bayes Business School > Finance
SWORD Depositor:
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[thumbnail of sn-Erio_submitted_20240229.pdf] Text - Accepted Version
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