Quotation Frey, Rüdiger, Sin, Carlos. 1999. Bound on European Option Prices under Stochastic Volatility. Mathematical Finance 9 97-116.




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
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


Frey, Rüdiger (Details)
Sin, Carlos
Institute for Statistics and Mathematics IN (Details)
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