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Pricing complexity options

Author

Listed:
  • Malihe Alikhani
  • Bj{o}rn Kjos-Hanssen
  • Amirarsalan Pakravan
  • Babak Saadat

Abstract

We consider options that pay the complexity deficiency of a sequence of up and down ticks of a stock upon exercise. We study the price of European and American versions of this option numerically for automatic complexity, and theoretically for Kolmogorov complexity. We also consider run complexity, which is a restricted form of automatic complexity.

Suggested Citation

  • Malihe Alikhani & Bj{o}rn Kjos-Hanssen & Amirarsalan Pakravan & Babak Saadat, 2015. "Pricing complexity options," Papers 1505.03587, arXiv.org, revised Mar 2016.
    • Handle: RePEc:arx:papers:1505.03587
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    File URL: http://arxiv.org/pdf/1505.03587
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