Spread options are multi-asset options whose payoffs depend on the difference of two underlying financial variables. In most cases, analytically closed form solutions for pricing such payoffs are not available, and the application of numerical pricing methods turns out to be non-trivial. We...

The optimal portfolio of a utility-maximizing investor trading in the S&P 500 index and cash, subject to proportional transaction costs, becomes stochastically dominated when overlaid with a zero-net-cost portfolio of S&P 500 options bought at their ask and written at their bid price in most...

1 Stochastic Dominance: Introduction -- 2 Stochastic Dominance Option Pricing I: The Frictionless Case -- 3 Proportional Transaction Costs: An Introduction -- 4 Stochastic Dominance Option Pricing II: Option Bounds Under Transaction Costs -- 5 Stochastic Dominance Option Pricing: Empirical...