scholarly journals EUROPEAN CALL OPTION APPLICATION IN INCOMPLETE MARKET-ANALYSIS AND DEVELOPMENT

2014 ◽  
Vol 10 (1) ◽  
pp. 157-168
Author(s):  
Ro’fah Nur Rachmawati ◽  
Sufon ◽  
Widodo Budiharto
Keyword(s):  
Incomplete Market ◽  
Market Analysis ◽  
Call Option ◽  
European Call Option

scholarly journals Continuous-Time Portfolio Selection and Option Pricing under Risk-Minimization Criterion in an Incomplete Market

2013 ◽  
Vol 2013 ◽  
pp. 1-11
Author(s):  
Xinfeng Ruan ◽  
Wenli Zhu ◽  
Jiexiang Huang ◽  
Shuang Li
Keyword(s):  
Option Pricing ◽  
Portfolio Selection ◽  
Incomplete Market ◽  
Martingale Measure ◽  
Call Option ◽  
Risk Minimization ◽  
European Call Option ◽  
Optimal Portfolio Selection ◽  
Transformation Methods ◽  
Special Case

We study option pricing with risk-minimization criterion in an incomplete market where the dynamics of the risky underlying asset are governed by a jump diffusion equation. We obtain the Radon-Nikodym derivative in the minimal martingale measure and a partial integrodifferential equation (PIDE) of European call option. In a special case, we get the exact solution for European call option by Fourier transformation methods. Finally, we employ the pricing kernel to calculate the optimal portfolio selection by martingale methods.

An Explicit Formula for Option Pricing in Discrete Incomplete Markets

1998 ◽  
Vol 01 (02) ◽  
pp. 283-288 ◽  
Author(s):  
Grażyna Wolczyńska
Keyword(s):  
Option Pricing ◽  
Explicit Formula ◽  
Incomplete Markets ◽  
Multinomial Distribution ◽  
Incomplete Market ◽  
Call Option ◽  
Risk Minimization ◽  
Optimal Price ◽  
European Call Option

Some aspects of the pricing of European call option are disscussed. We consider the simplest case of an incomplete market in the situation when the model of the market is discrete and increments of shares prices have a multinomial distribution. We look for similarities between this model and the model of Cox, Ross and Rubinstein. In particular we consider the possibility of using induction backwards and we look for an optimal price and strategy using the method of risk-minimization step by step from the date of realization T to 0.

STOCHASTIC VOLATILITY

2002 ◽  
Vol 05 (05) ◽  
pp. 515-530 ◽  
Author(s):  
SOTIRIOS SABANIS
Keyword(s):  
Brownian Motion ◽  
Stochastic Volatility ◽  
Series Representation ◽  
Random Variable ◽  
Call Option ◽  
Underlying Asset ◽  
European Call Option ◽  
Practical Convergence ◽  
Security Price ◽  
Simulation Results

Hull and White [1] have priced a European call option for the case in which the volatility of the underlying asset is a lognormally distributed random variable. They have obtained their formula under the assumption of uncorrelated innovations in security price and volatility. Although the option pricing formula has a power series representation, the question of convergence has been left unanswered. This paper presents an iterative method for calculating all the higher order moments of volatility necessary for the process of proving convergence theoretically. Moreover, simulation results are given that show the practical convergence of the series. These results have been obtained by using a displaced geometric Brownian motion as a volatility process.

Dynamic Robust Pricing Model of European Call Option under the Fractional Market with Knightian Uncertainty

2011 ◽  
Vol 271-273 ◽  
pp. 675-678
Author(s):  
Hui Zhang ◽  
Wen Yu Meng
Keyword(s):  
Financial Market ◽  
Conditional Expectation ◽  
Explicit Solution ◽  
Knightian Uncertainty ◽  
Call Option ◽  
Pricing Model ◽  
European Call Option

The fractional financial market with Knightian uncertainty is studied. Using the important theories of the quasi conditional expectation and the quasi martingale, we establish the dynamic robust pricing model of European call option and get the explicit solution of the model.

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