The paper examines a market for a stock, discount bonds of all maturities, and European calls of all strikes and all maturities on the stock. The implied volatility of a call in this market is a function, of our choice, of time to maturity and monyness that does not change over time. Our paper...

The paper examines a market for a stock, discount bonds of all maturities and European calls and puts on the stock of all strikes and all maturities. It derives a discrete time arbitrage free model. Said model is implemented in the binomial framework world in which both stock and bonds dynamics...

To value non-transferable non-hedgeable (NTNH) contingent claims and price executive stock options (ESOs), we use a replication argument to translate portfolios with NTNH derivatives into portfolios of primary assets (only) with stochastic portfolio constraints. By identifying stochastic...