# Multidimensional Breeden-Litzenberger representation for state price densities and static hedging

## Author Info

• Jarno Talponen
• Lauri Viitasaari
Registered author(s):

## Abstract

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.

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File URL: http://arxiv.org/pdf/1401.6383

## Bibliographic Info

Paper provided by arXiv.org in its series Papers with number 1401.6383.

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 Length: Date of creation: Jan 2014 Date of revision: Handle: RePEc:arx:papers:1401.6383 Contact details of provider: Web page: http://arxiv.org/

## References

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1. Avi Bick., 1982. "Comments on the Valuation of Derivative Assets," Research Program in Finance Working Papers 125, University of California at Berkeley.
2. Donald J. Brown & Stephen A. Ross, 1988. "Spanning, Valuation and Options," Cowles Foundation Discussion Papers 873, Cowles Foundation for Research in Economics, Yale University.
3. 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.
4. Bick, Avi, 1982. "Comments on the valuation of derivative assets," Journal of Financial Economics, Elsevier, vol. 10(3), pages 331-345, November.
5. Jarrow, Robert A., 1986. "A characterization theorem for unique risk neutral probability measures," Economics Letters, Elsevier, vol. 22(1), pages 61-65.
6. Lauri Viitasaari, 2012. "Option prices with call prices," Papers 1207.6205, arXiv.org, revised Aug 2012.
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