Option pricing in incomplete discrete markets

Grazyna Wolczynska

Applied Mathematical Finance, 1998, vol. 5, issue 3-4, 165-179

Abstract: Various methods of option pricing in discrete time models are discussed. The classical risk minimization method often results in negative prices and a natural modification is proposed. Another method of risk minimization using an inductive procedure as in the Cox-Ross-Rubinstein model is also proposed. The definition of the risk interpreted as the maximum of possible loss is discussed.

Keywords: Incomplete Markets; Derivative Securities (search for similar items in EconPapers)
Date: 1998
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DOI: 10.1080/135048698334628

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