IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Arbitrages and Arrow-Debreu Prices

  • Gaia Barone

    ()

    (Università LUISS “Guido Carli”)

Registered author(s):

    The goal of this work is to check that there are no arbitrage opportunities in the CBOE market for S&P500 options and to extract from these options’ quotes the state-price density consistent with the Merton model. The structure of the article is as follows: in Section 2 we examine the relations between arbitrages and Arrow-Debreu prices; in Section 3 we consider two models which seem to be consistent with the market prices of index options: the CEV model and the Merton model; finally, in Section 4 we estimate the state-price density consistent with the Merton-Geske model. Some conclusions follow.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.rivistapoliticaeconomica.it/2008/nov-dic/pdf/Barone_en.pdf
    Download Restriction: no

    Article provided by SIPI Spa in its journal Rivista di Politica Economica.

    Volume (Year): 98 (2008)
    Issue (Month): 6 (November-December)
    Pages: 43-78

    as
    in new window

    Handle: RePEc:rpo:ripoec:v:98:y:2008:i:6:p:43-78
    Contact details of provider:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Mark Rubinstein., 1994. "Implied Binomial Trees," Research Program in Finance Working Papers RPF-232, University of California at Berkeley.
    2. 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.
    3. Rubinstein, Mark, 1994. " Implied Binomial Trees," Journal of Finance, American Finance Association, vol. 49(3), pages 771-818, July.
    4. Hansen, Lars Peter & Jagannathan, Ravi, 1991. "Implications of Security Market Data for Models of Dynamic Economies," Journal of Political Economy, University of Chicago Press, vol. 99(2), pages 225-62, April.
    5. Banz, Rolf W & Miller, Merton H, 1978. "Prices for State-contingent Claims: Some Estimates and Applications," The Journal of Business, University of Chicago Press, vol. 51(4), pages 653-72, October.
    6. Scholes, Myron S. & Wolfson, Mark A., 1989. "Decentralized investment banking : The case of discount dividend-reinvestment and stock-purchase plans," Journal of Financial Economics, Elsevier, vol. 24(1), pages 7-35, September.
    7. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-70, May.
    8. Geske, Robert, 1977. "The Valuation of Corporate Liabilities as Compound Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(04), pages 541-552, November.
    9. Garman, Mark B., 1976. "An algebra for evaluating hedge portfolios," Journal of Financial Economics, Elsevier, vol. 3(4), pages 403-427, October.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:rpo:ripoec:v:98:y:2008:i:6:p:43-78. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sabrina Marino)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.