  Option pricing is an integral part of modern financial risk management. The
well-known Black and Scholes (1973) formula is commonly used for this purpose.
This paper is an attempt to extend their work to a situation in which the
unconditional volatility of the original asset is increasing during a certain
period of time. We consider a market suffering from a financial crisis. We
provide the solution for the equation of the underlying asset price as well as
finding the hedging strategy. In addition, a closed formula of the pricing
problem is proved for a particular case. The suggested formulas are expected to
make the valuation of options and the underlying hedging strategies during
financial crisis more precise.
