Option Pricing in an Incomplete Market

被引：0

作者：

Grigorian, Karen ^{[1
]}

Jarrow, Robert A. ^{[2
]}

机构：

[1] Univ Calif Santa Barbara, Dept Stat & Appl Probabil, Santa Barbara, CA 93106 USA

[2] Cornell Univ, Samuel Curtis Johnson Grad Sch Management, Ithaca, NY 14853 USA

来源：

QUARTERLY JOURNAL OF FINANCE | 2024年 / 14卷 / 03期

关键词：

Option pricing; incomplete markets; martingale measures; risk-neutral valuation;

D O I：

10.1142/S2010139224500095

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

The purpose of this paper is to illustrate the pricing of options in an incomplete market using the new consistent uplifted martingale measure methodology introduced by Grigorian and Jarrow [2024, Filtration Reduction and Incomplete Markets, Frontiers of Mathematical Finance, 3(1), 78-105; 2023, Filtration Reduction and Completeness in Brownian Motion Models. Working Paper, Cornell University; 2024, Filtration Reduction and Completeness in Jump-Diffusion Models. Working Paper, Cornell University]. We apply it to an incomplete market where a stock has stochastic volatility. Two valuation formulas are generated, depending upon whether the trader is more concerned about volatility or price risk in the construction of a partial replicating portfolio for the option's payoff.

引用

页数：16

共 8 条

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[7] OPTION PRICING WHEN UNDERLYING STOCK RETURNS ARE DISCONTINUOUS
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[J]. JOURNAL OF FINANCIAL ECONOMICS, 1976, 3 (1-2) : 125 - 144
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