Option Pricing with Delayed Information
Mathematical Finance
2017-07-07 v1
Abstract
We propose a model to study the effects of delayed information on option pricing. We first talk about the absence of arbitrage in our model, and then discuss super replication with delayed information in a binomial model, notably, we present a closed form formula for the price of convex contingent claims. Also, we address the convergence problem as the time-step and delay length tend to zero and introduce analogous results in the continuous time framework. Finally, we explore how delayed information exaggerates the volatility smile.
Keywords
Cite
@article{arxiv.1707.01600,
title = {Option Pricing with Delayed Information},
author = {Tomoyuki Ichiba and Seyyed Mostafa Mousavi},
journal= {arXiv preprint arXiv:1707.01600},
year = {2017}
}