IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1006.2555.html
   My bibliography  Save this paper

Price as a matter of choice and nonstochastic randomness

Author

Listed:
  • Yaroslav Ivanenko

Abstract

A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular cases. We show that in the general case of nonstochastic randomness the minimal expected profit of uncovered European option position is always negative. A version of delta hedge is proposed.

Suggested Citation

  • Yaroslav Ivanenko, 2010. "Price as a matter of choice and nonstochastic randomness," Papers 1006.2555, arXiv.org, revised Mar 2011.
    • Handle: RePEc:arx:papers:1006.2555
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1006.2555
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stephen A. Ross, 2013. "The Arbitrage Theory of Capital Asset Pricing," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 1, pages 11-30, World Scientific Publishing Co. Pte. Ltd..
    2. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shi, Leilei, 2006. "Does security transaction volume–price behavior resemble a probability wave?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 366(C), pages 419-436.
    2. Saggese, Pietro & Belmonte, Alessandro & Dimitri, Nicola & Facchini, Angelo & Böhme, Rainer, 2023. "Arbitrageurs in the Bitcoin ecosystem: Evidence from user-level trading patterns in the Mt. Gox exchange platform," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 251-270.
    3. Irene Klein & Emmanuel Lepinette & Lavinia Ostafe, 2012. "Large Financial Markets and Asymptotic Arbitrage with Small Transaction Costs," Papers 1211.0443, arXiv.org.
    4. Ferreira, Eva & Gil-Bazo, Javier & Orbe, Susan, 2011. "Conditional beta pricing models: A nonparametric approach," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3362-3382.
    5. Sudhir A. Shah, 2024. "Money-metric valuation of assets," Working papers 347, Centre for Development Economics, Delhi School of Economics.
    6. Georgy Chabakauri & Kathy Yuan & Konstantinos E Zachariadis, 2022. "Multi-asset Noisy Rational Expectations Equilibrium with Contingent Claims," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(5), pages 2445-2490.
    7. Ke Du, 2013. "Commodity Derivative Pricing Under the Benchmark Approach," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2, July-Dece.
    8. Peter Van Tassel & Erik Vogt, 2016. "Global variance term premia and intermediary risk appetite," Staff Reports 789, Federal Reserve Bank of New York.
    9. Fischer, Stanley & Merton, Robert C., 1984. "Macroeconomics and finance: The role of the stock market," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 21(1), pages 57-108, January.
    10. Carmen López-Martín & Sonia Benito Muela & Raquel Arguedas, 2021. "Efficiency in cryptocurrency markets: new evidence," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 403-431, September.
    11. Michael Dempsey, 2015. "Stock Markets, Investments and Corporate Behavior:A Conceptual Framework of Understanding," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number p1007, August.
    12. Committee, Nobel Prize, 2013. "Understanding Asset Prices," Nobel Prize in Economics documents 2013-1, Nobel Prize Committee.
    13. Jian Guo & Saizhuo Wang & Lionel M. Ni & Heung-Yeung Shum, 2022. "Quant 4.0: Engineering Quantitative Investment with Automated, Explainable and Knowledge-driven Artificial Intelligence," Papers 2301.04020, arXiv.org.
    14. Anjan V. Thakor, 2023. "Finance research: What are the new frontiers?," The Financial Review, Eastern Finance Association, vol. 58(3), pages 453-462, August.
    15. Robert Holman, 2004. "Bernard de Mandeville, Adam Smith a počestní darebové naší doby [Bernard de Mandeville, Adam Smith and virtuous knaves of our times]," Politická ekonomie, Prague University of Economics and Business, vol. 2004(5), pages 657-662.
    16. Bas Peeters & Cees L. Dert & André Lucas, 2003. "Black Scholes for Portfolios of Options in Discrete Time: the Price is Right, the Hedge is wrong," Tinbergen Institute Discussion Papers 03-090/2, Tinbergen Institute.
    17. Eckhard Platen, 1999. "Axiomatic principles for a market model," Published Paper Series 1999-3, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    18. Gabriel Fiuza de Bragança & Katia Rocha & Fernando Camacho, 2006. "A Taxa de Remuneração do Capital e a Nova Regulação das Telecomunicações," Discussion Papers 1160, Instituto de Pesquisa Econômica Aplicada - IPEA.
    19. Emanuel Derman, 2002. "The perception of time, risk and return during periods of speculation," Quantitative Finance, Taylor & Francis Journals, vol. 2(4), pages 282-296.
    20. Andrew Ang & Robert J. Hodrick & Yuhang Xing & Xiaoyan Zhang, 2006. "The Cross‐Section of Volatility and Expected Returns," Journal of Finance, American Finance Association, vol. 61(1), pages 259-299, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1006.2555. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.