  The Black-Scholes theory of option pricing has been considered for many years
as an important but very approximate zeroth-order description of actual market
behavior. We generalize the functional form of the diffusion of these systems
and also consider multi-factor models including stochastic volatility. Daily
Eurodollar futures prices and implied volatilities are fit to determine
exponents of functional behavior of diffusions using methods of global
optimization, Adaptive Simulated Annealing (ASA), to generate tight fits across
moving time windows of Eurodollar contracts. These short-time fitted
distributions are then developed into long-time distributions using a robust
non-Monte Carlo path-integral algorithm, PATHINT, to generate prices and
derivatives commonly used by option traders.

Computational Physics;Computational Engineering, Finance, and Science;Data Analysis, Statistics and Probability;Pricing of Securities