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Option spanning with exogenous information structure

  • Galvani, Valentina

Supplementing a finite state-space static securities market with options written on an injective claim obtains market completeness. This study concludes that options maintain this spanning property in the infinite state-space static securities market models of interest in the extant literature. In addition, underlyers for which options bring about market completeness are shown to be dense.

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File URL: http://www.sciencedirect.com/science/article/B6VBY-4SVKSVM-2/2/e01c6914405946876a5d2d6ac8d0e9c5
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Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 45 (2009)
Issue (Month): 1-2 (January)
Pages: 73-79

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Handle: RePEc:eee:mateco:v:45:y:2009:i:1-2:p:73-79
Contact details of provider: Web page: http://www.elsevier.com/locate/jmateco

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  1. Alexandre M. Baptista, 2005. "Options And Efficiency In Multidate Security Markets," Mathematical Finance, Wiley Blackwell, vol. 15(4), pages 569-587.
  2. Arditti, Fred D. & John, Kose, 1980. "Spanning the State Space with Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(01), pages 1-9, March.
  3. Ross, Stephen A, 1976. "Options and Efficiency," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 75-89, February.
  4. Donald J. Brown & Stephen A. Ross, 1988. "Spanning, Valuation and Options," Cowles Foundation Discussion Papers 873, Cowles Foundation for Research in Economics, Yale University.
  5. Duan, Jin-Chuan & Moreau, Arthur F. & Sealey, C. W., 1992. "Spanning with Index Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(02), pages 303-309, June.
  6. Breeden, Douglas T & Litzenberger, Robert H, 1978. "Prices of State-contingent Claims Implicit in Option Prices," The Journal of Business, University of Chicago Press, vol. 51(4), pages 621-51, October.
  7. Brown, Donald J. & Ross, Stephen, 1983. "Spanning and arbitrage in securities markets with options: A state preference aproach," Mathematical Social Sciences, Elsevier, vol. 4(2), pages 186-186, April.
  8. Green, Richard C. & Jarrow, Robert A., 1987. "Spanning and completeness in markets with contingent claims," Journal of Economic Theory, Elsevier, vol. 41(1), pages 202-210, February.
  9. Nachman, David C., 1987. "Efficient funds for meager asset spaces," Journal of Economic Theory, Elsevier, vol. 43(2), pages 335-347, December.
  10. Robert A. Jarrow & Xing Jin & Dilip B. Madan, 1999. "The Second Fundamental Theorem of Asset Pricing," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 255-273.
  11. John, Kose, 1981. "Efficient Funds in a Financial Market with Options: A New Irrelevance Proposition," Journal of Finance, American Finance Association, vol. 36(3), pages 685-95, June.
  12. Battig, Robert J & Jarrow, Robert A, 1999. "The Second Fundamental Theorem of Asset Pricing: A New Approach," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1219-35.
  13. John, Kose, 1984. "Market Resolution and Valuation in Incomplete Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(01), pages 29-44, March.
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