Accession Number : ADA316737

Title :   Options Pricing in Incomplete Markets: An Asymptotic Approach.

Descriptive Note : Technical rept..

Corporate Author : CHICAGO UNIV IL DEPT OF STATISTICS

Personal Author(s) : Mykland, Per A.

PDF Url : ADA316737

Report Date : 1996

Pagination or Media Count : 27

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.

Descriptors :   *ECONOMIC ANALYSIS, *POISSON DENSITY FUNCTIONS, MATHEMATICAL MODELS, UNCERTAINTY, STATISTICS, COSTS, COMMODITIES, BROWNIAN MOTION, PRICE INDEX.

Subject Categories : Economics and Cost Analysis

Distribution Statement : APPROVED FOR PUBLIC RELEASE