A note on options and bubbles under the CEV model: implications for pricing and hedging

被引：6

作者：

Dias, Jose Carlos ^{[1
,2
]}

Nunes, Joao Pedro Vidal ^{[1
,2
]}

Cruz, Aricson ^{[1
,2
]}

机构：

[1] Inst Univ Lisboa ISCTE IUL, Edificio 2,Av Prof Anibal Bettencourt, P-1600189 Lisbon, Portugal

[2] Business Res Unit BRU IUL, Lisbon, Portugal

来源：

REVIEW OF DERIVATIVES RESEARCH | 2020年 / 23卷 / 03期

关键词：

Bubbles; CEV model; Greeks; Option pricing; Put-call parity; Local martingales; AMERICAN-STYLE OPTIONS; CONSTANT ELASTICITY; LOCAL MARTINGALES; PRICES; RISK; VOLATILITY; VALUATION; IMPLICIT; JUMP;

D O I：

10.1007/s11147-019-09164-x

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

The discounted price process under the constant elasticity of variance (CEV) model is not a martingale (wrt the risk-neutral measure) for options markets with upward sloping implied volatility smiles. The loss of the martingale property implies the existence of (at least) two option prices for the call option: the price for which the put-call parity holds and the (risk-neutral) price representing the lowest cost of replicating the call payoff. This article derives closed-form solutions for the Greeks of the risk-neutral call option pricing solution that are valid for any CEV process exhibiting forward skew volatility smile patterns. Using an extensive numerical analysis, we conclude that the differences between the call prices and Greeks of both solutions are substantial, which might yield significant errors of analysis for pricing and hedging purposes.

引用

页码：249 / 272

页数：24

共 49 条

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