Economics at your fingertips  

Analytical Comparisons of Option prices in Stochastic Volatility Models

Vicky Henderson

OFRC Working Papers Series from Oxford Financial Research Centre

Abstract: This paper orders option prices under various well known martingale measures in an incomplete stochastic volatility model. The central result is a comparison theorem which proves convex option prices are decreasing in the market price of volatility risk, the parameter governing the choice of pricing measure. The theorem is applied to order option prices under the minimal martingale, q-optimal and minimal entropy measures. This ordering depends on the mean variance tradeoff process whilst the specifics of the volatility dynamics are not important. We illustrate our results by analyzing the Hull and White, Heston and Stein and Stein models.

New Economics Papers: this item is included in nep-ets, nep-fin, nep-fmk and nep-rmg
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in OFRC Working Papers Series from Oxford Financial Research Centre Contact information at EDIRC.
Bibliographic data for series maintained by Maxine Collett ().

Page updated 2019-11-20
Handle: RePEc:sbs:wpsefe:2002mf03