Arbeitspapier
Initial offerings of options
This paper considers the introduction of stock options in an (dynamically) incomplete securities market made up of a riskless bond and the stock. The stock price follows a geometric Brownian motion with constant drift. However, there is incomplete information about the unknown stochastic volatility. The option price is determined by a uniform-price auction. Thus an option pricing formula results from the interaction of market participants relying on private information on the unknown stochastic volatility under an explicit market structure. This paper incorporates market microstructure considerations into an extended Black-Scholes model with incomplete information on the underlying volatility. It relies on the growing importance of auctionlike trading rules in financial markets.
- Sprache
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Englisch
- Erschienen in
-
Series: SFB 373 Discussion Paper ; No. 2001,22
- Klassifikation
-
Wirtschaft
Contingent Pricing; Futures Pricing; option pricing
Auctions
Asymmetric and Private Information; Mechanism Design
Noncooperative Games
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Müller, Sigrid M.
- Ereignis
-
Veröffentlichung
- (wer)
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Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
- (wo)
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Berlin
- (wann)
-
2001
- Handle
- URN
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urn:nbn:de:kobv:11-10049441
- Letzte Aktualisierung
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10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Müller, Sigrid M.
- Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes
Entstanden
- 2001
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