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Risk-neutral compatibility with option prices

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  • Jean Jacod
  • Philip Protter

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  • Jean Jacod & Philip Protter, 2010. "Risk-neutral compatibility with option prices," Finance and Stochastics, Springer, vol. 14(2), pages 285-315, April.
    • Handle: RePEc:spr:finsto:v:14:y:2010:i:2:p:285-315
    DOI: 10.1007/s00780-009-0109-9
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    References listed on IDEAS

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    1. Ernst Eberlein & Sebastian Raible, 1999. "Term Structure Models Driven by General Lévy Processes," Mathematical Finance, Wiley Blackwell, vol. 9(1), pages 31-53, January.
    2. Mark Davis & Jan Obloj, 2007. "Market completion using options," Papers 0710.2792, arXiv.org, revised Oct 2008.
    3. Tomas Björk & Yuri Kabanov & Wolfgang Runggaldier, 1997. "Bond Market Structure in the Presence of Marked Point Processes," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 211-239, April.
    4. Eberlein, Ernst & Keller, Ulrich & Prause, Karsten, 1998. "New Insights into Smile, Mispricing, and Value at Risk: The Hyperbolic Model," The Journal of Business, University of Chicago Press, vol. 71(3), pages 371-405, July.
    5. David Heath & Robert Jarrow & Andrew Morton, 2008. "Bond Pricing And The Term Structure Of Interest Rates: A New Methodology For Contingent Claims Valuation," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 13, pages 277-305, World Scientific Publishing Co. Pte. Ltd..
    6. Protter, Philip, 2001. "A partial introduction to financial asset pricing theory," Stochastic Processes and their Applications, Elsevier, vol. 91(2), pages 169-203, February.
    7. Ernst Eberlein & Jean Jacod & Sebastian Raible, 2005. "Lévy term structure models: No-arbitrage and completeness," Finance and Stochastics, Springer, vol. 9(1), pages 67-88, January.
    8. Robert A. Jarrow, 2015. "Asset Price Bubbles," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 201-218, December.
    9. Marc Romano & Nizar Touzi, 1997. "Contingent Claims and Market Completeness in a Stochastic Volatility Model," Mathematical Finance, Wiley Blackwell, vol. 7(4), pages 399-412, October.
    10. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-155, January.
    11. René Carmona & Sergey Nadtochiy, 2009. "Local volatility dynamic models," Finance and Stochastics, Springer, vol. 13(1), pages 1-48, January.
    12. Martin Schweizer & Johannes Wissel, 2008. "Term Structures Of Implied Volatilities: Absence Of Arbitrage And Existence Results," Mathematical Finance, Wiley Blackwell, vol. 18(1), pages 77-114, January.
    13. Martin Schweizer & Johannes Wissel, 2008. "Arbitrage-free market models for option prices: the multi-strike case," Finance and Stochastics, Springer, vol. 12(4), pages 469-505, October.
    14. Emanuel Derman & Iraj Kani, 1998. "Stochastic Implied Trees: Arbitrage Pricing with Stochastic Term and Strike Structure of Volatility," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 61-110.
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    Citations

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    Cited by:

    1. Cao, Jingyi & Li, Dongchen & Young, Virginia R. & Zou, Bin, 2022. "Stackelberg differential game for insurance under model ambiguity," Insurance: Mathematics and Economics, Elsevier, vol. 106(C), pages 128-145.
    2. Sebastian Herrmann & Johannes Muhle-Karbe, 2017. "Model Uncertainty, Recalibration, and the Emergence of Delta-Vega Hedging," Papers 1704.04524, arXiv.org.
    3. Elisa Alòs & Jorge A. León, 2013. "On the closed-form approximation of short-time random strike options," Economics Working Papers 1347, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Pietro Siorpaes, 2015. "Optimal investment and price dependence in a semi-static market," Finance and Stochastics, Springer, vol. 19(1), pages 161-187, January.
    5. David Criens & Kathrin Glau & Zorana Grbac, 2015. "Martingale property of exponential semimartingales: a note on explicit conditions and applications to financial models," Papers 1506.08127, arXiv.org, revised Aug 2016.
    6. Robert A. Jarrow, 2015. "Asset Price Bubbles," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 201-218, December.
    7. Antoon Pelsser & Mitja Stadje, 2014. "Time-Consistent And Market-Consistent Evaluations," Mathematical Finance, Wiley Blackwell, vol. 24(1), pages 25-65, January.
    8. Stadje, M.A. & Pelsser, A., 2014. "Time-Consistent and Market-Consistent Evaluations (Revised version of 2012-086)," Discussion Paper 2014-002, Tilburg University, Center for Economic Research.
    9. S. Kindermann & P. Mayer, 2011. "On the calibration of local jump-diffusion asset price models," Finance and Stochastics, Springer, vol. 15(4), pages 685-724, December.
    10. René Carmona & Sergey Nadtochiy, 2012. "Tangent Lévy market models," Finance and Stochastics, Springer, vol. 16(1), pages 63-104, January.
    11. Robert A. Jarrow & Simon S. Kwok, 2023. "An explosion time characterization of asset price bubbles," International Review of Finance, International Review of Finance Ltd., vol. 23(2), pages 469-479, June.
    12. Mohamed N. Abdelghani & Alexander V. Melnikov, 2017. "Optional Defaultable Markets," Risks, MDPI, vol. 5(4), pages 1-21, October.
    13. Robert Jarrow & Philip Protter, 2011. "Foreign currency bubbles," Review of Derivatives Research, Springer, vol. 14(1), pages 67-83, April.
    14. Samuel N. Cohen & Christoph Reisinger & Sheng Wang, 2021. "Arbitrage-free neural-SDE market models," Papers 2105.11053, arXiv.org, revised Aug 2021.
    15. Jan Kallsen & Paul Krühner, 2015. "On a Heath–Jarrow–Morton approach for stock options," Finance and Stochastics, Springer, vol. 19(3), pages 583-615, July.
    16. Roseline Bilina Falafala & Robert A. Jarrow & Philip Protter, 2016. "Relative asset price bubbles," Annals of Finance, Springer, vol. 12(2), pages 135-160, May.
    17. Sebastian Herrmann & Johannes Muhle-Karbe, 2017. "Model uncertainty, recalibration, and the emergence of delta–vega hedging," Finance and Stochastics, Springer, vol. 21(4), pages 873-930, October.
    18. Robert Jarrow, 2016. "Bubbles And Multiple-Factor Asset Pricing Models," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 19(01), pages 1-19, February.
    19. Cao, Jingyi & Li, Dongchen & Young, Virginia R. & Zou, Bin, 2023. "Reinsurance games with two reinsurers: Tree versus chain," European Journal of Operational Research, Elsevier, vol. 310(2), pages 928-941.
    20. Mehdi El Amrani & Antoine Jacquier & Claude Martini, 2019. "Dynamics of symmetric SSVI smiles and implied volatility bubbles," Papers 1909.10272, arXiv.org, revised Feb 2021.

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    More about this item

    Keywords

    Option prices; Risk neutral measures; Equity pricing; Equivalent martingale measures; 60G44; 60H10; 60H05; G12; G13;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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