Multidimensional Breeden-Litzenberger representation for state price densities and static hedging
In this article, we consider European options of type $h(X^1_T, X^2_T,\ldots, X^n_T)$ depending on several underlying assets. We study how such options can be valued in terms of simple vanilla options in non-specified market models. We consider different approaches related to static hedging and derive several pricing formulas for a wide class of payoff functions $h:\R_+^n\rightarrow \R$. We also give new relations between prices of different options both in one dimensional and multidimensional case.
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.:
- 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.
- Lauri Viitasaari, 2012. "Option prices with call prices," Papers 1207.6205, arXiv.org, revised Aug 2012.
- Avi Bick., 1982. "Comments on the Valuation of Derivative Assets," Research Program in Finance Working Papers 125, University of California at Berkeley.
- Brown, Donald J & Ross, Stephen A, 1991.
"Spanning, Valuation and Options,"
Springer, vol. 1(1), pages 3-12, January.
- Jarrow, Robert A., 1986. "A characterization theorem for unique risk neutral probability measures," Economics Letters, Elsevier, vol. 22(1), pages 61-65.
- Bick, Avi, 1982. "Comments on the valuation of derivative assets," Journal of Financial Economics, Elsevier, vol. 10(3), pages 331-345, November.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:1401.6383. 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: (arXiv administrators)
If references are entirely missing, you can add them using this form.