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Price as a matter of choice and nonstochastic randomness

Listed author(s):
  • Yaroslav Ivanenko

A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular cases. We show that in the general case of nonstochastic randomness the minimal expected profit of uncovered European option position is always negative. A version of delta hedge is proposed.

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File URL: http://arxiv.org/pdf/1006.2555
File Function: Latest version
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Paper provided by arXiv.org in its series Papers with number 1006.2555.

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Date of creation: Jun 2010
Date of revision: Mar 2011
Handle: RePEc:arx:papers:1006.2555
Contact details of provider: Web page: http://arxiv.org/

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  1. Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
  2. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
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