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Option pricing with transaction costs and a nonlinear Black-Scholes equation
Soner, Halil Mete; Barles, Guy - In: Finance and Stochastics 2 (1998) 4, pp. 369-397
. Therefore, in such a market, preferences have to be introduced in order to evaluate the prices of options. The main goal of this …
Persistent link: https://www.econbiz.de/10005166845
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The Riesz representation theorem and weak∗ compactness of semimartingales
Kiiski, Matti - In: Finance and Stochastics 24 (2020) 4, pp. 827-870
We show that the sequential closure of a family of probability measures on the canonical space of càdlàg paths satisfying Stricker’s uniform tightness condition is a weak∗ compact set of semimartingale measures in the dual pairing of bounded continuous functions and Radon measures, that...
Persistent link: https://www.econbiz.de/10014503834
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A multicurrency extension of the lognormal interest rate Market Models
Schlögl, Erik - In: Finance and Stochastics 6 (2002) 2, pp. 173-196
The Market Models of the term structure of interest rates, in which forward LIBOR or forward swap rates are modelled to be lognormal under the forward probability measure of the corresponding maturity, are extended to a multicurrency setting. If lognormal dynamics are assumed for forward LIBOR...
Persistent link: https://www.econbiz.de/10005390647
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Markov-functional interest rate models
Kennedy, Joanne; Hunt, Phil; Pelsser, Antoon - In: Finance and Stochastics 4 (2000) 4, pp. 391-408
We introduce a general class of interest rate models in which the value of pure discount bonds can be expressed as a functional of some (low-dimensional) Markov process. At the abstract level this class includes all current models of practical importance. By specifying these models in...
Persistent link: https://www.econbiz.de/10005390650
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Applications of Malliavin calculus to Monte Carlo methods in finance
Fournié, Eric; Lasry, Jean-Michel; Lions, Pierre-Louis; … - In: Finance and Stochastics 3 (1999) 4, pp. 391-412
functionals of multidimensional diffusion processes. We illustrate the results by applying the formula to exotic European options …
Persistent link: https://www.econbiz.de/10005390652
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Lévy processes in finance: a remedy to the non-stationarity of continuous martingales
Yor, Marc; Leblanc, Boris - In: Finance and Stochastics 2 (1998) 4, pp. 399-408
In this note, we prove that under some minor conditions on $\sigma$, if a martingale $X_t = \int_0^t \sigma_u dW_u $ satisfies, for every given pair $u \geq 0, \, \xi \geq 0$, $X_{u+\xi}-X_u{\mathop{=}^{\mathrm{(law)}}} X_{\xi},$ then necessarily, $|\sigma_u|$ is a constant and X is a constant...
Persistent link: https://www.econbiz.de/10005390655
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Derivative pricing based on local utility maximization
Kallsen, Jan - In: Finance and Stochastics 6 (2002) 1, pp. 115-140
This paper discusses a new approach to contingent claim valuation in general incomplete market models. We determine the neutral derivative price which occurs if investors maximize their local utility and if derivative demand and supply are balanced. We also introduce the sensitivity process of a...
Persistent link: https://www.econbiz.de/10005390668
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On Leland's strategy of option pricing with transactions costs
Kabanov, Yuri M.; (*), Mher M. Safarian - In: Finance and Stochastics 1 (1997) 3, pp. 239-250
We compute the limiting hedging error of the Leland strategy for the approximate pricing of the European call option in a market with transactions costs. It is not equal to zero in the case when the level of transactions costs is a constant, in contradiction with the claim in Leland (1985).
Persistent link: https://www.econbiz.de/10005390670
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Fast accurate binomial pricing
Rogers, L.C.G.; Stapleton, E.J. - In: Finance and Stochastics 2 (1997) 1, pp. 3-17
it with reference to pricing of barrier options, one- and two-sided, with fixed, moving or partial barriers, and also the … pricing of American put options. It has often been observed that if one tries to price a barrier option using a binomial … options. The interpretation we give here is applicable much more widely, and helps to smooth out the `odd-even' ripples in the …
Persistent link: https://www.econbiz.de/10005390674
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On the range of options prices (*)
Eberlein, Ernst; Jacod, Jean - In: Finance and Stochastics 1 (1997) 2, pp. 131-140
In this paper we consider the valuation of an option with time to expiration $T$ and pay-off function $g$ which is a convex function (as is a European call option), and constant interest rate $r$, in the case where the underlying model for stock prices $(S_t)$ is a purely discontinuous process...
Persistent link: https://www.econbiz.de/10005390676