How to account for virtual arbitrage in the standard derivative pricing
In this short note we show how virtual arbitrage opportunities can be modelled and included in the standard derivative pricing without changing the general framework.
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- Kirill Ilinski & Alexander Stepanenko, 1999. "Derivative pricing with virtual arbitrage," Papers cond-mat/9902046, arXiv.org.
- Merton, Robert C., 1976.
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- Hull, John C & White, Alan D, 1987. " The Pricing of Options on Assets with Stochastic Volatilities," Journal of Finance, American Finance Association, vol. 42(2), pages 281-300, June.
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