Author : Robert C. Merton
Publisher : Forgotten Books
ISBN 13 : 9780331884531
Total Pages : 82 pages
Book Rating : 4.8/5 (845 download)
Book Synopsis The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns (Classic Reprint) by : Robert C. Merton
Download or read book The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns (Classic Reprint) written by Robert C. Merton and published by Forgotten Books. This book was released on 2017-11-24 with total page 82 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from The Impact on Option Pricing of Specification Error in the Underlying Stock Price Returns At the heart of the derivation of the Black - Scholes option pricing formula is the arbitrage technique by which investors can follow a dynamic pertfolio strategy using the stock and riskless borrowing t0'exactly repro duce the return structure of an option. By following this strategy in com bination with a short position in an option, the investor can eliminate all risk from the total position, and hence to avoid arbitrage.opportunities. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.