相关论文: Pricing European Options in Realistic Markets

Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…

The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…

We consider a portfolio with call option and the corresponding underlying asset under the standard assumption that stock-market price represents a random variable with lognormal distribution. Minimizing the variance (hedging risk) of the…

In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…

The approach that allows find European option price on the assumption of hedging at discrete times is proposed. The routine allows find the option price not for lognormal distribution functions of underlying asset only but for wide enough…

We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…

In the context of a Black-Scholes economy and with a no-arbitrage argument, we derive arbitrarily accurate lower and upper bounds for the value of European options on a stock paying a discrete dividend. Setting the option price error below…

In this paper we derive an effective equation for derivative pricing which accounts for the presence of virtual arbitrage opportunities and their elimination by the market. We model the arbitrage return by a stochastic process and find an…

Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…

The incorporation of a dividend yield in the classical option pricing model of Black- Scholes results in a minor modification of the Black-Scholes formula, since the lognormal dynamic of the underlying asset is preserved. However, market…

We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…

In the standard Black-Scholes-Merton framework, dividends are represented as a continuous dividend yield and the pricing of Vanilla options on a stock is achieved through the well-known Black-Scholes formula. In reality however, stocks pay…

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…

We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…

Usually, in the Black-Scholes pricing theory the volatility is a positive real parameter. Here we explore what happens if it is allowed to be a complex number. The function for pricing a European option with a complex volatility has…

In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…

Real life hedging in the Black-Scholes model must be imperfect and if the stock's drift is higher than the risk free rate, leads to a profit on average. Hence the option price is examined as a fair game agreement between the parties, based…

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…

The Black-Scholes model gives vanilla Europen call option prices as a function of the volatility. We prove Lipschitz stability in the inverse problem of determining the implied volatility, which is a function of the underlying asset, from a…

We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the…