Put-Call Parity and Market Frictions
We extend the Fundamental Theorem of Finance and the Pricing Rule Representation Theorem of Cox and Ross (see Ross  and  and Cox and Ross ) to the case in which market frictions are aken into account but the Put-Call Parity is still assumed to hold. In turn, we obtain a representation of the pricing rule as a discounted expectation with respect to a nonadditive risk neutral probability. As a further contribution, in so doing we endogenize the state space structure and the contingent claim representation usually assumed to represent assets and markets.
|Date of creation:||2012|
|Contact details of provider:|| Postal: via Rontgen, 1 - 20136 Milano (Italy)|
Web page: http://www.igier.unibocconi.it/
|Order Information:|| Web: http://www.igier.unibocconi.it/en/papers/index.htm Email: |
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.:
- Mark B. Garman and James A. Ohlson., 1980.
"Valuation of Risky Assets in Arbitrage-Free Economies with Transactions Costs,"
Research Program in Finance Working Papers
103, University of California at Berkeley.
- Garman, Mark B. & Ohlson, James A., 1981. "Valuation of risky assets in arbitrage-free economies with transactions costs," Journal of Financial Economics, Elsevier, vol. 9(3), pages 271-280, September.
- Brown, Donald J & Ross, Stephen A, 1991.
"Spanning, Valuation and Options,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 1(1), pages 3-12, January.
- repec:dau:papers:123456789/5630 is not listed on IDEAS
- Prisman, Eliezer Z, 1986. " Valuation of Risky Assets in Arbitrage Free Economies with Frictions," Journal of Finance, American Finance Association, vol. 41(3), pages 545-557, July.
- Philippe Robert-Demontrond & R. Ringoot, 2004. "Introduction," Post-Print halshs-00081823, HAL.
- Elyégs Jouini & Hédi Kallal, 1995. "Arbitrage In Securities Markets With Short-Sales Constraints," Mathematical Finance, Wiley Blackwell, vol. 5(3), pages 197-232.
- repec:dau:papers:123456789/5647 is not listed on IDEAS
- Stoll, Hans R, 1973. "The Relationship Between Put and Call Option Prices: Reply," Journal of Finance, American Finance Association, vol. 28(1), pages 185-187, March.
- Ross, Stephen A., 1976. "The arbitrage theory of capital asset pricing," Journal of Economic Theory, Elsevier, vol. 13(3), pages 341-360, December.
- repec:crs:wpaper:9513 is not listed on IDEAS
- Cox, John C & Ross, Stephen A, 1976. "A Survey of Some New Results in Financial Option Pricing Theory," Journal of Finance, American Finance Association, vol. 31(2), pages 383-402, May.
- Itzhak Gilboa, 1987.
"Expected Utility with Purely Subjective Non-Additive Probabilities,"
- Gilboa, Itzhak, 1987. "Expected utility with purely subjective non-additive probabilities," Journal of Mathematical Economics, Elsevier, vol. 16(1), pages 65-88, February.
- Stephen A. Ross, 1976. "Options and Efficiency," The Quarterly Journal of Economics, Oxford University Press, vol. 90(1), pages 75-89.
- Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
- Simone Cerreia-Vioglio & Fabio Maccheroni & Massimo Marinacci & Luigi Montrucchio, 2010. "Singed Integral Representations of Comonotonic Additive Functionals," Working Papers 366, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- David Schmeidler, 1989.
"Subjective Probability and Expected Utility without Additivity,"
Levine's Working Paper Archive
7662, David K. Levine.
- Schmeidler, David, 1989. "Subjective Probability and Expected Utility without Additivity," Econometrica, Econometric Society, vol. 57(3), pages 571-587, May.
- Stoll, Hans R, 1969. "The Relationship between Put and Call Option Prices," Journal of Finance, American Finance Association, vol. 24(5), pages 801-824, December.
- Luttmer, Erzo G J, 1996. "Asset Pricing in Economies with Frictions," Econometrica, Econometric Society, vol. 64(6), pages 1439-1467, November.
- Klemkosky, Robert C. & Resnick, Bruce G., 1980. "An ex ante analysis of put-call parity," Journal of Financial Economics, Elsevier, vol. 8(4), pages 363-378, December.
- Ross, Stephen A, 1987. "Arbitrage and Martingales with Taxation," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 371-393, April.
- Amihud, Yakov & Mendelson, Haim, 1991. " Liquidity, Maturity, and the Yields on U.S. Treasury Securities," Journal of Finance, American Finance Association, vol. 46(4), pages 1411-1425, September.
- Gould, J. P. & Galai, D., 1974. "Transactions costs and the relationship between put and call prices," Journal of Financial Economics, Elsevier, vol. 1(2), pages 105-129, July.
- J. Michael Harrison & Stanley R. Pliska, 1981. "Martingales and Stochastic Integrals in the Theory of Continous Trading," Discussion Papers 454, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Jarrow, Robert A & O'Hara, Maureen, 1989. " Primes and Scores: An Essay on Market Imperfections," Journal of Finance, American Finance Association, vol. 44(5), pages 1263-1287, December.
- Chateauneuf, A. & Kast, R. & Lapied, A., 1992.
"Choquet Pricing for Financial Markets with Frictions,"
92a11, Universite Aix-Marseille III.
- A. Chateauneuf & R. Kast & A. Lapied, 1996. "Choquet Pricing For Financial Markets With Frictions," Mathematical Finance, Wiley Blackwell, vol. 6(3), pages 323-330.
- Ross, Stephen A, 1978. "A Simple Approach to the Valuation of Risky Streams," The Journal of Business, University of Chicago Press, vol. 51(3), pages 453-475, July.
- Amihud, Yakov & Mendelson, Haim, 1986. "Asset pricing and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 17(2), pages 223-249, December.
- Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, vol. 11(3), pages 215-260, August.
- Kamara, Avraham & Miller, Thomas W., 1995. "Daily and Intradaily Tests of European Put-Call Parity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(04), pages 519-539, December.
- Jouini Elyes & Kallal Hedi, 1995. "Martingales and Arbitrage in Securities Markets with Transaction Costs," Journal of Economic Theory, Elsevier, vol. 66(1), pages 178-197, June.
- Green, Richard C. & Jarrow, Robert A., 1987. "Spanning and completeness in markets with contingent claims," Journal of Economic Theory, Elsevier, vol. 41(1), pages 202-210, February.
When requesting a correction, please mention this item's handle: RePEc:igi:igierp:447. 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: ()
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.