IDEAS home Printed from https://ideas.repec.org/p/ant/wpaper/2004004.html
   My bibliography  Save this paper

On the pricing of options under limited information

Author

Listed:
  • DE SCHEPPER, Ann
  • HEIJNEN, Bart

Abstract

In spite of the power of the Black & Scholes option pricing method, there are situations in which the hypothesis of a lognormal model is too restrictive. One possibility to deal with this problem, consists of a weaker hypothesis, fixing only successive moments and eventually the mode of the price process of a risky asset, and not the complete distribution. The consequence of this generalization is the fact that the option price is no longer a unique value, but a range of several possible values. We show how to find upper and lower bounds, resulting in a rather narrow range. We give results in case two moments, three moments, or two moments and the mode of the underlying price process are fixed.

Suggested Citation

  • DE SCHEPPER, Ann & HEIJNEN, Bart, 2004. "On the pricing of options under limited information," Working Papers 2004004, University of Antwerp, Faculty of Business and Economics.
    • Handle: RePEc:ant:wpaper:2004004
    as

    Download full text from publisher

    File URL: https://repository.uantwerpen.be/docman/irua/86aeb9/84e6c312.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Black-Scholes; Option pricing; Limited information;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:ant:wpaper:2004004. 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: Joeri Nys (email available below). General contact details of provider: https://edirc.repec.org/data/ftufsbe.html .

    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.