A Diffusion Approximation for the Riskless Profit Under Selling of Discrete Time Call Options. Non-identically Distributed Jumps
Alexander V. Nagaev,
Sergei A. Nagaev and
Robert Kunst ()
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Alexander V. Nagaev: Faculty of Mathematics and Computer Sciences, Nicolaus Copernicus University
Sergei A. Nagaev: Department of Economics and Finance, Institute for Advanced Studies
No 164, Economics Series from Institute for Advanced Studies
A discrete time model of financial markets is considered. It is assumed that the relative jumps of the risky security price are independent non-identically distributed random variables. In the focus of attention is the expected non-risky profit of the investor that arises when the jumps of the stock price are bounded while the investor follows the upper hedge. The considered discrete time model is approximated by a continuous time model that generalizes the classical geometrical Brownian motion.
Keywords: Asymptotic uniformity; Local limit theorem; Volatility (search for similar items in EconPapers)
JEL-codes: G11 G12 G13 (search for similar items in EconPapers)
Pages: 25 pages
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https://irihs.ihs.ac.at/id/eprint/1610 First version, 2005 (application/pdf)
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Persistent link: https://EconPapers.repec.org/RePEc:ihs:ihsesp:164
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