Search results for "Fundamental theorem of asset pricing"

showing 2 items of 2 documents

Integration and arbitrage in the Spanish financial markets: An empirical approach*

2000

Several authors have introduced different ways to measure integra-tion between financial markets. Most of them are derived from thebasic assumptions about asset prices, like the Law of One Price or ...

Economics and EconometricsFinancial economicsFinancial marketFundamental theorem of asset pricingGeneral Business Management and AccountingFixed income arbitrageAccountingLaw of one priceArbitrage pricing theoryEconomicsRisk arbitrageArbitrageFinanceIndex arbitrageJournal of Futures Markets
researchProduct

Building a Consistent Pricing Model from Observed Option Prices

1999

This paper constructs a model for the evolution of a risky security that is consistent with a set of observed call option prices. It explicitly treats the fact that only a discrete data set can be observed in practice. The framework is general and allows for state dependent volatility and jumps. The theoretical properties are studied. An easy procedure to check for arbitrage opportunities in market data is proved and then used to ensure the feasibility of our approach. The implementation is discussed: testing on market data reveals a U-shaped form for the "local volatility" depending on the state and, surprisingly, a large probability for strong price movements.

MicroeconomicsLocal volatilityEconometricsArbitrage pricing theoryEconomicsCall optionFundamental theorem of asset pricingArbitrageVolatility (finance)Implied volatilityRational pricingSSRN Electronic Journal
researchProduct