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Black Scholes for Portfolios of Options in Discrete Time: the Price is Right, the Hedge is wrong
Peeters, Bas; Dert, Cees L.; Lucas, André - Tinbergen Instituut - 2003
-Scholes-Merton framework large portfolios of options can be hedged without risk in discrete time. The nature of the hedge portfolio in the … values of the options in our framework are driven by systematic and idiosyncratic risk factors. Instead of linearly (delta …
Persistent link: https://www.econbiz.de/10011257082
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Expected Utility and Catastrophic Risk
Ikefuji, Masako; Laeven, Roger; Magnus, Jan; Muris, Chris - Tinbergen Instituut - 2014
An expected utility based cost-benefit analysis is in general fragile to its distributional assumptions. We derive necessary and sufficient conditions on the utility function of the expected utility model to avoid this. The conditions ensure that expected (marginal) utility remains finite also...
Persistent link: https://www.econbiz.de/10011261938