CONTINGENT CLAIMS VALUED AND HEDGED BY PRICING AND INVESTING IN A BASIS

DOI10.1111/j.1467-9965.1994.tb00093.xzbMath0884.90042OpenAlexW2119126233MaRDI QIDQ4372036

Dilip B. Madan, Frank Milne

Publication date: 5 April 1998

Published in: Mathematical Finance (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1111/j.1467-9965.1994.tb00093.x

zbMATH Keywords

Hilbert spaceHermite polynomialsEuropean option pricingS\&P 500 indexmartingale measures

Mathematics Subject Classification ID

Signal detection and filtering (aspects of stochastic processes) (60G35) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (28)

Pseudospectral methods for pricing options ⋮ Orthogonal expansions for VIX options under affine jump diffusions ⋮ The Jacobi stochastic volatility model ⋮ DENSITY FUNCTIONALS, WITH AN OPTION-PRICING APPLICATION ⋮ A new representation of the risk-neutral distribution and its applications ⋮ A machine learning approach to portfolio pricing and risk management for high‐dimensional problems ⋮ Estimation of risk-neutral densities using positive convolution approximation ⋮ Hedging error as generalized timing risk ⋮ Evaluation of American option prices in a path integral framework using Fourier-Hermite series expansions ⋮ Asymptotic option pricing under pure-jump Lévy processes via nonlinear regression ⋮ Nonparametric risk management and implied risk aversion ⋮ American options with stochastic dividends and volatility: a nonparametric investigation ⋮ Econometric specification of the risk neutral valuation model ⋮ A moment expansion approach to option pricing ⋮ A modified Black-Scholes pricing formula for European options with bounded underlying prices ⋮ The implied risk neutral density dynamics: evidence from the S\&P TSX 60 index ⋮ Retrieving risk neutral densities based on risk neutral moments through a Gram-Charlier series expansion ⋮ HERMITE BINOMIAL TREES: A NOVEL TECHNIQUE FOR DERIVATIVES PRICING ⋮ Hedging using simulation: a least squares approach ⋮ Inversion of option prices for implied risk-neutral probability density functions: general theory and its applications to the natural gas market ⋮ Polynomial extensions of distributions and their applications in actuarial and financial modeling ⋮ Hermite expansion and estimation of monotonic transformations of Gaussian data ⋮ DYNAMIC FACTOR MODELS ⋮ Approximating payoffs and pricing formulas ⋮ Time-consistent and market-consistent actuarial valuation of the participating pension contract ⋮ A functional analysis approach to the static replication of European options ⋮ Semi-nonparametric estimation of the call-option price surface under strike and time-to-expiry no-arbitrage constraints ⋮ The difference between LSMC and replicating portfolio in insurance liability modeling

Uses Software

• Mathematica

Cites Work

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• A characterization theorem for unique risk neutral probability measures
• Spanning and completeness in markets with contingent claims
• Martingales and stochastic integrals in the theory of continuous trading
• On the fundamental theorem of asset pricing with an infinite state space
• Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation
• Options and Efficiency
• A general recursive discrete-time filter
• Pricing Interest-Rate-Derivative Securities
• On the optimal filtering of diffusion processes

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