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The European options hedge perfectly in a Poisson-Gaussian stock market model

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  • C. Mancini

Abstract

It is shown that n + 1 European call options written on a stock S with different strike prices (or the stock and n calls) are non-redundant assets in a model for the stock driven by a Brownian motion and n independent Poisson processes. That extends the result obtained for n = 1 by Pham and implies that the proposed model can price and perfectly hedge any integrable derivative on S.

Suggested Citation

  • C. Mancini, 2002. "The European options hedge perfectly in a Poisson-Gaussian stock market model," Applied Mathematical Finance, Taylor & Francis Journals, vol. 9(2), pages 87-102.
    • Handle: RePEc:taf:apmtfi:v:9:y:2002:i:2:p:87-102
    DOI: 10.1080/13504860210148241
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