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A Diffusion Approximation for the Riskless Profit Under Selling of Discrete Time Call Options. Non-identically Distributed Jumps

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Author Info
Nagaev, Alexander V. (Faculty of Mathematics and Computer Sciences, Nicolaus Copernicus University)
Nagaev, Sergei A. (Department of Economics and Finance, Institute for Advanced Studies)
Kunst, Robert M. (Department of Economics and Finance, Institute for Advanced Studies and Department of Economics, University of Vienna)

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Abstract

A discrete time model of financial markets is considered. It is assumed that the relative jumps of the risky security price are independent non-identically distributed random variables. In the focus of attention is the expected non-risky profit of the investor that arises when the jumps of the stock price are bounded while the investor follows the upper hedge. The considered discrete time model is approximated by a continuous time model that generalizes the classical geometrical Brownian motion.

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File URL: http://www.ihs.ac.at/publications/eco/es-164.pdf
File Format: application/pdf
File Function: First version, 2005
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Publisher Info
Paper provided by Institute for Advanced Studies in its series Economics Series with number 164.

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Length: 25 pages
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:ihs:ihsesp:164

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Related research
Keywords: Asymptotic uniformity; Local limit theorem; Volatility;

Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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This page was last updated on 2009-12-10.


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