scientific article; zbMATH DE number 1302646

MaRDI QIDQ4249197zbMATH OpenFDO

Authors Christer Borell

Publication date 2 September 1999

Full work available at URL http://www.msri.org/communications/books/Book34/

zbMATH Keywords

isoperimetric inequalityoptions

Mathematics Subject Classification ID

Inequalities and extremum problems involving convexity in convex geometry (52A40) Inequalities; stochastic orderings (60E15) Brownian motion (60J65) Derivative securities (option pricing, hedging, etc.) (91G20)

Review text

An option has a value that is a function of an underlying collection of securities. Given an option a major technical challenge is to price it. This paper considers the pricing of options when the underlying stock prices are governed by a joint geometric Brownian motion. In general finding a closed form expression for the price of the option as a function of the primitives is difficult. This paper shows how various qualitative properties of the price of the option can be derived from the properties of the option payoff. The main tool are inequalities of the Brunn-Minkowski type in Gauss space. For the entire collection see [Zbl 0911.00007].

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