CAPM option pricing

Sven Husmann and Neda Todorova

Finance Research Letters, 2011, vol. 8, issue 4, 213-219

Abstract: This paper extends the option pricing equations of Black and Scholes [1973. Journal of Political Economy 81, 637–654], Jarrow and Madan [1997. European Finance Review 1, 15–30] and Husmann and Stephan [2007. Journal of Futures Markets 27, 961–979]. In particular, we show that the length of the individual planning horizon is a determinant of an option’s value. The derived pricing equations can be presented in terms of the Black and Scholes [1973. Journal of Political Economy 81, 637–654] option values which ensures an easy application in practice.

Keywords: Capital asset pricing model; Option pricing; Planning horizon; Incomplete markets (search for similar items in EconPapers)
JEL-codes: C02 C68 G11 G13 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:8:y:2011:i:4:p:213-219

DOI: 10.1016/j.frl.2011.03.001

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