Frey, Rüdiger, Sin, Carlos. 1999. Bound on European Option Prices under Stochastic Volatility. Mathematical Finance 9 97-116.
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Abstract
In this paper we consider the range of prices consistent with no arbitrage for European options in a general stochastic volatility model. We give conditions under which the infimum and the supremum of the possible option prices are equal to the intrinsic value of the option and to the current price of the stock, respectively, and show that these conditions are satisfied in most of the stochastic volatility models from the financial literature. We also discuss properties of Black-Scholes hedging strategies in stochastic volatility models where the volatility is bounded.
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Status of publication | Published |
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Affiliation | WU |
Type of publication | Journal article |
Journal | Mathematical Finance |
Citation Index | SSCI |
WU Journalrating 2009 | A |
WU-Journal-Rating new | FIN-A, STRAT-B, VW-B, WH-B |
Language | English |
Title | Bound on European Option Prices under Stochastic Volatility |
Volume | 9 |
Year | 1999 |
Page from | 97 |
Page to | 116 |
URL | http://onlinelibrary.wiley.com/doi/10.1111/1467-9965.00064/pdf |
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- People
- Frey, Rüdiger (Details)
- External
- Sin, Carlos
- Organization
- Institute for Statistics and Mathematics IN (Details)