Towards non-equilibrium option pricing theory

@inproceedings{Otto2000TowardsNO,
  title={Towards non-equilibrium option pricing theory},
  author={Matthias Otto},
  year={2000}
}
A recently proposed model (by Ilinski et al.) for the dynamics of intermediate deviations from equilibrium of financial markets ( “virtual” arbitrage returns) is incorporated within an equilibrium (arbitrage-free) pricing method for derivatives on securities (e.g. stocks) using an equivalence to option pricing theory with stochastic interest rates. Making the arbitrage return a component of a fictitious short-term interest rate (while the real risk-free rate is assumed to be constant) and thus… CONTINUE READING

Citations

Publications citing this paper.

References

Publications referenced by this paper.
Showing 1-10 of 12 references

Options

  • J. Hull
  • Futures and Other Derivatives. Prentice-Hall…
  • 1997
Highly Influential
5 Excerpts

Rennie: Financial Calculus

  • A.J.O.M.W. Baxter
  • 1996
Highly Influential
5 Excerpts

Comparison of some key approaches to hedging in incomplete markets

  • D. Heath, E. Platen, M. Schweizer
  • Working paper FMRR98-003, University of…
  • 1998
1 Excerpt

Interest-Rate Option Models

  • R. Rebonato
  • John Wiley & Sons, Chichester
  • 1996
2 Excerpts

J

  • J. P. Bouchaud, D. Sornette
  • Phys. I (France) 4, 863
  • 1994

Statistical Mechanics

  • R. P. Feynman
  • Addison-Wesley, Reading
  • 1972
1 Excerpt

An Introduction to Probability Theory and Its Applications

  • W. Feller
  • 3rd edition. John Wiley & Sons, New York
  • 1968
1 Excerpt

Similar Papers

Loading similar papers…