Pricing European options with a log Student’s t-distribution: A Gosset formula

The distributions of returns for stocks are not well described by a normal probability density function (pdf). Student’s t-distributions, which have fat tails, are known to fit the distributions of the returns. We present pricing of European call or put options using a log Student’s t-distribution, which we call a Gosset approach in honour of W.S. Gosset, the author behind the nom de plume Student. The approach that we present can be used to …