This paper presents a simple discrete-time model for valuing options. The fundamental economic principles of option pricing by arbitrage methods are particularly clear in this setting. Its development requires only elementary mathematics, yet it…
Mathematical Economics
In this subdiscipline:
6,305 papers
Popular papers
-
-
The long history of the theory of option pricing began in 1900 when the French mathematician Louis Bachelier deduced an option pricing formula based on the assumption that stock prices follow a Brownian motion with zero drift. Since that time,…
-
If options are correctly priced in the market, it should not be possible to make sure profits by creating portfolios of long and short positions in options and their underlying stocks. Using this principle, a theoretical valuation formula for…
-
-
-
Because the classic interest rate condition requires default-free rates as input, the common practice of using rates derived from swap curves is not valid. This paper derives interest rate parity conditions that depend on basis swap spreads in…
-
The Convolution and Master equations governing the time behavior of the term structure of Interest Rates are set up both for continuous variables and for their discretised forms. The notion of Seed is introduced. The discretised theoretical…
-
NONE
-
We exploit administrative data combining workers' earnings histories with information about their firms to estimate the magnitude and temporal pattern of displaced workers' earnings losses. We find that high-tenure workers separating from distressed…
-
-
-
This paper develops a general stochastic model of a frictionless security market with continuous trading. The vector price process is given by a semimartingale of a certain class, and the general stochastic integral is used to represent capital…
-
Gross spreads received by underwriters on initial public offerings (IPOs) in the United States are much higher than in other countries. Furthermore, in recent years more than 90 percent of deals raising $20-80 million have spreads of exactly seven…
-
This paper characterizes all continuous price processes that are consistent with current option prices. This extends Derman and Kani (1994), Dupire (1994, 1997), and Rubinstein (1994), who only consider processes with deterministic volatility. Our…
-
-
In this report we propose a toy model for pricing derivatives on the realized variance of an Asset, which we apply for pricing correlation swaps on the components of an equity index. We find that the fair strike of a correlation swap is…
-
-
-
-
Popular tags
Sign up today - FREE
Mendeley saves you time finding and organizing research. Learn more
- All your research in one place
- Add and import papers easily
- Access it anywhere, anytime
Start using Mendeley in seconds!
Active members
-
Student (Bachelor) -
Ph.D. StudentKyōto, Japan -
ProfessorCentre for Economic and Regional Studies, Hungarian Academy of Sciences -
Student (Bachelor)Element Management Ltd. -
Other ProfessionalJelgava, Latvia