Option pricing models without probability
Damiano Brigo () and
Papers from arXiv.org
We describe the pricing and hedging practices refraining from the use of probability. We encode volatility in an enhancement of the price trajectory and we give pathwise presentations of the fundamental equations of Mathematical Finance. In particular this allows us to assess model misspecification, generalising the so-called fundamental theorem of derivative trading (see Ellersgaard et al. 2017). Our pathwise integrals and equations exhibit the role of Greeks beyond the leading-order Delta, and makes explicit the role of Gamma sensitivities.
Date: 2018-08, Revised 2019-04
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1808.09378
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