Real-world options: smile and residual risk
暂无分享,去创建一个
We present a theory of option pricing and hedging, designed to address non-perfect arbitrage, market friction and the presence of `fat' tails. An implied volatility `smile' is predicted. We give precise estimates of the residual risk associated with optimal (but imperfect) hedging.
[1] Benoit B. Mandelbrot,et al. Fractal Geometry of Nature , 1984 .
[2] R. C. Merton,et al. Continuous-Time Finance , 1990 .
[3] Jstor,et al. Invention in the Industrial Research Laboratory , 1963, Journal of Political Economy.