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Finance and Stochastics

Erschienen in:

01.07.2015

On a Heath–Jarrow–Morton approach for stock options

verfasst von: Jan Kallsen, Paul Krühner

Erschienen in: Finance and Stochastics | Ausgabe 3/2015

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Abstract

This paper aims at transferring the philosophy behind Heath–Jarrow–Morton to the modelling of call options with all strikes and maturities. Contrary to the approach by Carmona and Nadtochiy (Finance Stoch. 13:1–48, 2009) and related to the recent contribution (Finance Stoch. 16:63–104, 2012) by the same authors, the key parameterisation of our approach involves time-inhomogeneous Lévy processes instead of local volatility models. We provide necessary and sufficient conditions for absence of arbitrage. Moreover, we discuss the construction of arbitrage-free models. Specifically, we prove their existence and uniqueness given basic building blocks.

Vorheriger Artikel Approximate hedging for nonlinear transaction costs on the volume of traded assets

Nächster Artikel Forward equations for option prices in semimartingale models

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Titel: On a Heath–Jarrow–Morton approach for stock options
verfasst von: Jan Kallsen
Paul Krühner
Publikationsdatum: 01.07.2015
Verlag: Springer Berlin Heidelberg
Erschienen in: Finance and Stochastics / Ausgabe 3/2015
Print ISSN: 0949-2984
Elektronische ISSN: 1432-1122
DOI: https://doi.org/10.1007/s00780-015-0263-1

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