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.
|Date of creation:||03 Feb 1999|
|Note:||Type of Document - Postscript; prepared on UNIX Sparc TeX; to print on HP; pages: 7|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
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- Merton, Robert C., 1975.
"Option pricing when underlying stock returns are discontinuous,"
787-75., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Merton, Robert C., 1976. "Option pricing when underlying stock returns are discontinuous," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 125-144.
- 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.
- 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 637-654, May-June.
- Kirill Ilinski & Alexander Stepanenko, 1999. "Derivative pricing with virtual arbitrage," Papers cond-mat/9902046, arXiv.org.
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