Robust option replication for a Black-Scholes model extended with nondeterministic trends

DOI10.1155/S104895339900012XMaRDI QIDQ1307618zbMATH OpenFDO

Authors John Schoenmakers, Peter E. Kloeden

Publication date 19 November 2000

Published in Journal of Applied Mathematics and Stochastic Analysis (Search for Journal in Brave)

Full work available at URL https://eudml.org/doc/48564

zbMATH Keywords

Black-Scholes modelslong range behaviornull quadratic variation process

Mathematics Subject Classification ID

Stochastic integrals (60H05) Stochastic ordinary differential equations (aspects of stochastic analysis) (60H10) Derivative securities (option pricing, hedging, etc.) (91G20)

Review text

The authors propose an extension of the Black and Scholes model by adding a null variation process \(Z\) to the stochastic equation describing the evolution of stock prices. This model could explain long range dependence behavior of the prices; moreover the partial differential equation involved in the calculus of the Black-Scholes price of a European option is not modified by the addition of \(Z\), therefore this price does not depend on \(Z\). Arbitrage opportunities are studied.

Recommendations

• LONG RANGE DEPENDENCE, NO ARBITRAGE AND THE BLACK–SCHOLES FORMULA
• scientific article; zbMATH DE number 1359939
• Black-Scholes model under subordination
• scientific article; zbMATH DE number 1897420

Cited in

(14)

• Arbitrage and hedging in a non probabilistic framework
• Existence and uniqueness for solutions of mixed stochastic delay differential equations
• Two-time-scale stochastic differential delay equations driven by multiplicative fractional Brownian noise: averaging principle
• Rate of convergence of Euler approximation of time-dependent mixed SDEs driven by Brownian motions and fractional Brownian motions
• Pricing by hedging and no-arbitrage beyond semimartingales
• The covariation for Banach space valued processes and applications
• LONG RANGE DEPENDENCE, NO ARBITRAGE AND THE BLACK–SCHOLES FORMULA
• Asymptotic normality of randomized periodogram for estimating quadratic variation in mixed Brownian-fractional Brownian model
• A Delayed Black and Scholes Formula
• scientific article; zbMATH DE number 1897420 (Why is no real title available?)
• Robustness of the Black-Scholes approach in the case of options on several assets
• Clark-Ocone type formula for non-semimartingales with finite quadratic variation
• On stochastic calculus related to financial assets without semimartingales
• Semimartingale properties of a generalised fractional Brownian motion and its mixtures with applications in asset pricing

This page was built for publication: Robust option replication for a Black-Scholes model extended with nondeterministic trends

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q1307618)