A diffusion approximation for the riskless profit under selling of discrete time call options

A discrete time model of a financial market is considered. We focus on the study of a guaranteed profit of an investor which arises when the stock price jumps are bounded. The limit distribution of the profit as the model becomes closer to the classical model of the geometric Brownian motion is established. It is of interest that in contrast with the discrete approximation, no guaranteed profit occurs in the approximated continuous time model.

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Year of publication:	2003
Authors:	Nagaev, Sergei A.
Publisher:	Vienna : Institute for Advanced Studies (IHS)
Subject:	asymptotic uniformity \| weak convergence in Skorokhod Space D[0, 1].

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Series:	Reihe Ökonomie / Economics Series ; 137
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	74110900X [GVK] hdl:10419/71248 [Handle] RePEc:ihs:ihsesp:137 [RePEc]
Classification:	G13 - Contingent Pricing; Futures Pricing ; G24 - Investment Banking; Venture Capital; Brokerage ; C61 - Optimization Techniques; Programming Models; Dynamic Analysis
Source:	EconStor

Persistent link: https://www.econbiz.de/10010292785