Preliminary remarks on option pricing and dynamic hedging
Abstract
An elementary arbitrage principle and the existence of trends in financial time series, which is based on a theorem published in 1995 by P. Cartier and Y. Perrin, lead to a new understanding of option pricing and dynamic hedging. Intricate problems related to violent behaviors of the underlying, like the existence of jumps, become then quite straightforward by incorporating them into the trends. Several convincing computer experiments are reported.
Domains
Quantitative Finance [q-fin] Computational Finance [q-fin.CP] Quantitative Finance [q-fin] Risk Management [q-fin.RM] Mathematics [math] Logic [math.LO] Mathematics [math] Probability [math.PR] Mathematics [math] Statistics [math.ST] Statistics [stat] Statistics Theory [stat.TH] Computer Science [cs] Automatic Control Engineering Computer Science [cs] Signal and Image Processing Engineering Sciences [physics] Signal and Image processing
Origin : Files produced by the author(s)
Loading...