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Black-Scholes theory for an underlying with multiple attractors
[journal article]
Abstract A valuation theory for derivatives on an underlying that is subject to multiple attractors is proposed, the economic justification being attraction-adjusted hedging. In non-critical regions -- outside the boundaries of the attractor regions -- a European option price can be viewed as a derivative on... view more
A valuation theory for derivatives on an underlying that is subject to multiple attractors is proposed, the economic justification being attraction-adjusted hedging. In non-critical regions -- outside the boundaries of the attractor regions -- a European option price can be viewed as a derivative on an underlying with a mean-reverting law, such as a commodity price, however with a different payoff function.... view less
Classification
Economic Statistics, Econometrics, Business Informatics
Basic Research, General Concepts and History of Economics
Method
theory application
Free Keywords
Imperfections; Derivatives Pricing; Modelling Asset Price Dynamics; Nonequilibrium Systems
Document language
English
Publication Year
2008
Page/Pages
p. 453-457
Journal
Quantitative Finance, 8 (2008) 5
DOI
https://doi.org/10.1080/14697680701518035
Status
Postprint; peer reviewed
Licence
PEER Licence Agreement (applicable only to documents from PEER project)