Ibáñez, Alfredo - In: Journal of Banking & Finance 32 (2008) 2, pp. 311-325
In a standard option-pricing model, with continuous-trading and diffusion processes, this paper shows that the price of one European-style option can be factorized into two intuitive components: One robust, X0, which is priced by arbitrage, and a second, [Pi]0, which depends on a risk orthogonal...