MARGIN TRADING THROUGH HYPER TIMELINE

Siu-Ah Ng ()
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Siu-Ah Ng: School of Mathematical Sciences, University of KwaZulu-Natal, Pietermaritzburg, 3209, South Africa

International Journal of Theoretical and Applied Finance (IJTAF), 2007, vol. 10, issue 05, 801-815

Abstract: We consider a model of margin trading based on the hyperfinite timeline. Using only elementary nonstandard analysis we are able to derive explicit formulas for the expected margin call time and loss. Further margin trading strategy is studied and an application to pricing barrier option is given. We prove a generalization of the Catalan numbers which forms the combinatoric basis of our results and should be of independent interest.

Keywords: Nonstandard analysis; infinitesimal; hyperreal; hypermodel; Catalan numbers; margin trading; option pricing (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1142/S0219024907004470

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