Price as a matter of choice and nonstochastic randomness
Pricing of Securities
2011-03-22 v5 Probability
Portfolio Management
Applications
Abstract
A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular cases. We show that in the general case of nonstochastic randomness the minimal expected profit of uncovered European option position is always negative. A version of delta hedge is proposed.
Keywords
Cite
@article{arxiv.1006.2555,
title = {Price as a matter of choice and nonstochastic randomness},
author = {Yaroslav Ivanenko},
journal= {arXiv preprint arXiv:1006.2555},
year = {2011}
}
Comments
18 pages