The true invariant of an arbitrage free portfolio

Anatoly B. Schmidt

Physica A: Statistical Mechanics and its Applications, 2003, vol. 320, issue C, 535-538

Abstract: It is shown that the arbitrage free portfolio paradigm being applied to a portfolio with an arbitrary number of shares N allows for the extended solution in which the option price F depends on N. However the resulting stock hedging expense Q=MF (where M is the number of options in the portfolio) does not depend on whether N is treated as an independent variable or as a parameter. Therefore the stock hedging expense is the true invariant of the arbitrage free portfolio paradigm.

Keywords: Arbitrage free portfolio; Option pricing (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:320:y:2003:i:c:p:535-538

DOI: 10.1016/S0378-4371(02)01551-0

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