Numeraire Invariance and application to Option Pricing and Hedging
This is a short version of the paper of Exchange Options (2007), concentrating on the principle of numeraire invariance. It emphasizes application to unique pricing in arbitrage-free model, the derivation of hedge ratios and the PDE when price ratios are diffusions, explicit representations in the multivariate Poisson model, and the role played by homogeneity.
|Date of creation:||14 Feb 2008|
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- Farshid Jamshidian, 1993. "Option and Futures Evaluation With Deterministic Volatilities," Mathematical Finance, Wiley Blackwell, vol. 3(2), pages 149-159.
- 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.
- Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring.
- 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 637-54, May-June.
- 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.
- Margrabe, William, 1978. "The Value of an Option to Exchange One Asset for Another," Journal of Finance, American Finance Association, vol. 33(1), pages 177-86, March.
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