A paradox of diffusion market model related with existence of winning combinations of options

Nikolai Dokuchaev

Papers from arXiv.org

Abstract: We consider strategies of investments into options and diffusion market model. It is shown that there exists a correct proportion between "put" and "call" in the portfolio such that the average gain is almost always positive for a generic Black and Scholes model. This gain is zero if and only if the market price of risk is zero. It is discussed a paradox related to the corresponding loss of option's seller.

Date: 2001-03
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