The Leading eBooks Store Online 4,173,809 members ⚫ 1,357,844 ebooks

New to eBooks.com?

Learn more

Market-Conform Valuation of Options

Market-Conform Valuation of Options by Tobias Herwig
Buy this eBook
US$ 99.00
(If any tax is payable it will be calculated and shown at checkout.)
1. 1 The Area of Research In this thesis, we will investigate the 'market-conform' pricing of newly issued contingent claims. A contingent claim is a derivative whose value at any settlement date is determined by the value of one or more other underlying assets, e. g. , forwards, futures, plain-vanilla or exotic options with European or American-style exercise features. Market-conform pricing means that prices of existing actively traded securities are taken as given, and then the set of equivalent martingale measures that are consistent with the initial prices of the traded securities is derived using no-arbitrage arguments. Sometimes in the literature other expressions are used for 'market-conform' valuation - 'smile-consistent' valuation or 'fair-market' valuation - that describe the same basic idea. The seminal work by Black and Scholes (1973) (BS) and Merton (1973) mark a breakthrough in the problem of hedging and pricing contingent claims based on no-arbitrage arguments. Harrison and Kreps (1979) provide a firm mathematical foundation for the Black-Scholes- Merton analysis. They show that the absence of arbitrage is equivalent to the existence of an equivalent martingale measure. Under this mea­ sure the normalized security price process forms a martingale and so securities can be valued by taking expectations. If the securities market is complete, then the equivalent martingale measure and hence the price of any security are unique.
Springer Berlin Heidelberg; March 2006
113 pages; ISBN 9783540308386
Read online, or download in secure PDF format
Title: Market-Conform Valuation of Options
Author: Tobias Herwig
 
  • News
  • Contents
No entry found
ISBNs
3540308385
9783540308379
9783540308386