Strategic option pricing

Arbeitspapier

In this paper an extension of the well-known binomial approach to option pricing is presented. The classical question is: What is the price of an option on the risky asset? The traditional answer is obtained with the help of a replicating portfolio by ruling out arbitrage. Instead a two-person game from the Nash equilibrium of which the option price can be derived is formulated. Consequently both the underlying asset's price at expiration and the price of the option on this asset are endogenously determined. The option price derived this way turns out, however, to be identical to the classical no-arbitrage option price of the binomial model if the expiration-date prices of the underlying asset and the corresponding risk-neutral probability are properly adjusted according to the Nash equilibrium data of the game.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CEPIE Working Paper ; No. 03/20

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Contingent Pricing; Futures Pricing; option pricing ; Noncooperative Games
• Thema: option pricing ; game theory ; Nash equilibrium

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bieta, Volker ; Broll, Udo ; Siebe, Wilfried
• Ereignis: Veröffentlichung
• (wer): Technische Universität Dresden, Center of Public and International Economics (CEPIE)
• (wo): Dresden
• (wann): 2020

Weitere Informationen

• Handle: http://hdl.handle.net/10419/223341
• URN: urn:nbn:de:bsz:14-qucosa2-717192
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ