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About discrete hedging and option pricing

Listed author(s):
  • Dmitry Yakovlev

    (Tomsk Politechnic University)

  • Dmitry Zhabin

    (Tomsk Politechnic University)

Registered author(s):

    The approach that allows find European option price on the assumption of hedging at discrete times is proposed. The routine allows find the option price not for lognormal distribution functions of underlying asset only but for other classes of distribution functions too. It is shown that there exists a nonzero possibility that market parameters can take values such that to realize the hedging policy becomes impossible. This fact is not in contradiction with Black-Scholes option price model as long as this possibility tends to zero at the limit of continuous hedging.

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    Paper provided by EconWPA in its series Finance with number 0310005.

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    Length: 11 pages
    Date of creation: 05 Oct 2003
    Handle: RePEc:wpa:wuwpfi:0310005
    Note: Type of Document - Acrobat pdf; pages: 11
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