Market Conform Valuation of Options is popular PDF and ePub book, written by Tobias Herwig in 2006-03-12, it is a fantastic choice for those who relish reading online the Business & Economics genre. Let's immerse ourselves in this engaging Business & Economics book by exploring the summary and details provided below. Remember, Market Conform Valuation of Options can be Read Online from any device for your convenience.
Market Conform Valuation of Options Book PDF Summary
1. 1 The Area of Research In this thesis, we will investigate the 'market-conform' pricing of newly issued contingent claims. A contingent claim is a derivative whose value at any settlement date is determined by the value of one or more other underlying assets, e. g. , forwards, futures, plain-vanilla or exotic options with European or American-style exercise features. Market-conform pricing means that prices of existing actively traded securities are taken as given, and then the set of equivalent martingale measures that are consistent with the initial prices of the traded securities is derived using no-arbitrage arguments. Sometimes in the literature other expressions are used for 'market-conform' valuation - 'smile-consistent' valuation or 'fair-market' valuation - that describe the same basic idea. The seminal work by Black and Scholes (1973) (BS) and Merton (1973) mark a breakthrough in the problem of hedging and pricing contingent claims based on no-arbitrage arguments. Harrison and Kreps (1979) provide a firm mathematical foundation for the Black-Scholes- Merton analysis. They show that the absence of arbitrage is equivalent to the existence of an equivalent martingale measure. Under this mea sure the normalized security price process forms a martingale and so securities can be valued by taking expectations. If the securities market is complete, then the equivalent martingale measure and hence the price of any security are unique.
Detail Book of Market Conform Valuation of Options PDF
- Author : Tobias Herwig
- Release : 12 March 2006
- Publisher : Springer Science & Business Media
- ISBN : 9783540308386
- Genre : Business & Economics
- Total Page : 112 pages
- Language : English
- PDF File Size : 16,9 Mb
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