SERVING THE QUANTITATIVE FINANCE COMMUNITY

 
User avatar
list
Topic Author
Posts: 2041
Joined: October 26th, 2005, 2:08 pm

option hedging remark*

October 14th, 2011, 2:11 pm

From: "Carr, Peter" <Peter.P.Carr@morganstanley.com>To: ilyagikhman@yahoo.comSent: Thursday, September 15, 2011 7:40 AMSubject:IlyaI came across your recent posthttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=1918014I agree with what you write. I believe the issue is addressed in section V of the attachedI think you should cite the same work I do .bestpAttached file contained the paper " FAQ's in Option Pricing Theory" . This paper existed in 2 versions 1999, 2002.
 
User avatar
gomer767
Posts: 69
Joined: September 28th, 2011, 1:43 pm

option hedging remark*

October 14th, 2011, 2:36 pm

I am fairly new myself.....but how can C(S,t) = 0?Can I have infinity many options please?Think non-finance world....how many iPhone 4S's could Apple give away for free??If C(S,t) = 0 then that means t > T and K > S therefore....the option has expired worthless
Last edited by gomer767 on October 13th, 2011, 10:00 pm, edited 1 time in total.
 
User avatar
list
Topic Author
Posts: 2041
Joined: October 26th, 2005, 2:08 pm

option hedging remark*

October 14th, 2011, 2:53 pm

QuoteOriginally posted by: gomer767I am fairly new myself.....but how can C(S,t) = 0?Can I have infinity many options please?Think non-finance world....how many iPhone 4S's could Apple give away for free??If C(S,t) = 0 then that means t > T and K > S therefore....the option has expired worthlessC ( S , t ) = 0 was a joke it does not obviously a call option price. Nevertheless there is no arbitrage for buyer if he does not buy the option. This example shows that no arbitrage is a necessary condition for pricing but not a sufficient one.
ABOUT WILMOTT

PW by JB

Wilmott.com has been "Serving the Quantitative Finance Community" since 2001. Continued...


Twitter LinkedIn Instagram

JOBS BOARD

JOBS BOARD

Looking for a quant job, risk, algo trading,...? Browse jobs here...


GZIP: On