Overview
1. 1 The Area of Research In this thesis, we will investigate the 'market-conform' pricing of newly issued contingent claims. A contingent claim is a derivative whose value at any settlement date is determined by the value of one or more other underlying assets, e. g. , forwards, futures, plain-vanilla or exotic options with European or American-style exercise features. Market-conform pricing means that prices of existing actively traded securities are taken as given, and then the set of equivalent martingale measures that are consistent with the initial prices of the traded securities is derived using no-arbitrage arguments. Sometimes in the literature other expressions are used for 'market-conform' valuation - 'smile-consistent' valuation or 'fair-market' valuation - that describe the same basic idea. The seminal work by Black and Scholes (1973) (BS) and Merton (1973) mark a breakthrough in the problem of hedging and pricing contingent claims based on no-arbitrage arguments. Harrison and Kreps (1979) provide a firm mathematical foundation for the Black-Scholes- Merton analysis. They show that the absence of arbitrage is equivalent to the existence of an equivalent martingale measure. Under this mea sure the normalized security price process forms a martingale and so securities can be valued by taking expectations. If the securities market is complete, then the equivalent martingale measure and hence the price of any security are unique.
Full Product Details
Author: Tobias Herwig
Publisher: Springer-Verlag Berlin and Heidelberg GmbH & Co. KG
Imprint: Springer-Verlag Berlin and Heidelberg GmbH & Co. K
Edition: 2006 ed.
Volume: 571
Dimensions:
Width: 15.50cm
, Height: 0.60cm
, Length: 23.50cm
Weight: 0.454kg
ISBN: 9783540308379
ISBN 10: 3540308377
Pages: 106
Publication Date: 17 January 2006
Audience:
College/higher education
,
Undergraduate
Format: Paperback
Publisher's Status: Active
Availability: In Print
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Reviews
From the reviews: <p> This book is the authora (TM)s doctoral thesis. It is for students and professionals in option pricing and related topics. The focus of this book lays on the development of new approaches of market-conform valuation of derivatives. The new approaches are demonstrated by some examples. (Klaus Ehemann, Zentralblatt MATH, Vol. 1116 (18), 2007)
From the reviews: This book is the author's doctoral thesis. It is for students and professionals in option pricing and related topics. The focus of this book lays on the development of new approaches of market-conform valuation of derivatives. The new approaches are demonstrated by some examples. (Klaus Ehemann, Zentralblatt MATH, Vol. 1116 (18), 2007)
