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Stochastic Dominance Option Pricing - An Alternative Approach to Option Market Research (Hardcover, 1st ed. 2019)
Loot Price: R3,519
Discovery Miles 35 190
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Stochastic Dominance Option Pricing - An Alternative Approach to Option Market Research (Hardcover, 1st ed. 2019)
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Total price: R3,539
Discovery Miles: 35 390
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This book illustrates the application of the economic concept of
stochastic dominance to option markets and presents an alternative
option pricing paradigm to the prevailing no arbitrage simultaneous
equilibrium in the frictionless underlying and option markets. This
new methodology was developed primarily by the author, working
independently or jointly with other co-authors, over the course of
more than thirty years. Among others, it yields the fundamental
Black-Scholes-Merton option value when markets are complete,
presents a new approach to the pricing of rare event risk, and
uncovers option mispricing that leads to tradeable strategies in
the presence of transaction costs. In the latter case it shows how
a utility-maximizing investor trading in the market and a riskless
bond, subject to proportional transaction costs, can increase
his/her expected utility by overlaying a zero-net-cost portfolio of
options bought at their ask price and written at their bid price,
irrespective of the specific form of the utility function. The book
contains a unified presentation of these methods and results,
making it a highly readable supplement for educators and
sophisticated professionals working in the popular field of option
pricing. It also features a foreword by George Constantinides, the
Leo Melamed Professor of Finance at the Booth School of Business,
University of Chicago, USA, who was a co-author in several parts of
the book.
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