IDEAS home Printed from https://ideas.repec.org/a/spr/mathme/v53y2001i3p505-515.html
   My bibliography  Save this article

Variations of the Cox-Ross-Rubinstein model – conservative pricing strategies

Author

Listed:
  • Marcus Wrede
  • Norbert Schmitz

Abstract

Binomial models of n-period financial markets are of considerable practical and theoretical interest since they allow, due to their completeness, hedging strategies and pricing formulas. Here we derive several maximum properties of these models within the class of models with general exponential price processes; these properties lead to conservative pricing strategies. Moreover, we prove that for binomial models with decreasing volatility the initial price enables the seller of an option to adjust the hedges without any further investment. Finally, we show that the completeness remains valid for models with dependent two-valued price factors. Copyright Springer-Verlag Berlin Heidelberg 2001

Suggested Citation

  • Marcus Wrede & Norbert Schmitz, 2001. "Variations of the Cox-Ross-Rubinstein model – conservative pricing strategies," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 53(3), pages 505-515, July.
    • Handle: RePEc:spr:mathme:v:53:y:2001:i:3:p:505-515
    DOI: 10.1007/s001860100126
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s001860100126
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s001860100126?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:mathme:v:53:y:2001:i:3:p:505-515. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.