Options Pricing in Incomplete Markets: An Asymptotic Approach.

Abstract

It is explored how incomplete markets can be studied with the help of asymptotics. A compound Poisson model for the stock price is assumed and an expansion for the price of a European option is obtained as the stock price process converges to a geometric Brownian motion. This formulation also permits one to confront statistical uncertainty in the volatility of the stock price, and we show how this uncertainty impacts on the value of the option.

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Document Details

Document Type
Technical Report
Publication Date
Jan 01, 1996
Accession Number
ADA316737

Entities

People

  • Per A. Mykland

Organizations

  • University of Chicago

Tags

Communities of Interest

  • Materials and Manufacturing Processes

DTIC Thesaurus Topics

  • Abstracts
  • Asymptotic Series
  • Brownian Motion
  • Coefficients
  • Differential Equations
  • Diffusion Coefficient
  • Equations
  • Linear Differential Equations
  • Markov Processes
  • Probability
  • Probability Distributions
  • Random Variables
  • Statistics
  • Stochastic Processes
  • Theorems
  • Uncertainty
  • Volatility

Fields of Study

  • Mathematics

Readers

  • Analytical Chemistry
  • Government Contracting/Procurement.
  • Mathematical Modeling and Probability Theory.