Abstract
AbstractThe following sections are included:IntroductionRestrictions on rational option pricingEffects of dividends and changing exercise priceRestrictions on rational put option oricinaRational option pricing along Black-Scholes linesAn alternative derivation of the Black-Scholes modelExtension of the model to include dividend payments and exercise price changesValuing an American put optionValuing the “down and-out” call optionValuing a callable warrantAppendix 1Appendix 2Referencesdiscussion: Option Pricing Theory and Its ApplicationsINTRODUCTIONTHE MARTINGALE APPROACH TO OPTION PRICINGThe SetupDynamic Spanning and the Martingale Representation TheoremSome GeneralizationsEXISTENCE AND PROPERTIES OF OPTIMAL STRATEGIESAPPLICATIONS TO CONTINGENT-CLAIM PRICINGNOTESREFERENCES
Keywords
Black–Scholes modelDividendWarrantValuation of optionsPut optionInvestment theoryEconomicsRational pricingGeometric Brownian motionCall optionMathematical economicsFinancial economicsFinite difference methods for option pricingCapital asset pricing modelFinanceVolatility (finance)
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- 2005
- Type
- book-chapter
- Pages
- 229-288
- Citations
- 7439
- Access
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Cite This
Robert C. Merton
(2005).
Theory of rational option pricing.
WORLD SCIENTIFIC eBooks
, 229-288.
https://doi.org/10.1142/9789812701022_0008
Identifiers
- DOI
- 10.1142/9789812701022_0008