A Diffusion Approximation to the Markov Chains Model of the Financial Market and the Expected Riskless Profit Under Selling of Call and Put Options

Nagaev, Alexander V.; Nagaev, Sergej and Kunst, Robert M.ORCID: https://orcid.org/0000-0001-6831-2471 (January 2005) A Diffusion Approximation to the Markov Chains Model of the Financial Market and the Expected Riskless Profit Under Selling of Call and Put Options. Former Series > Working Paper Series > IHS Economics Series 165

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Abstract or Table of Contents

Abstract: A discrete time model of financial markets is considered. It is assumed that the stock price evolution is described by a homogeneous Markov chain. In the focus of attention is the expected value of the guaranteed profit of the investor that arises when the jumps of the stock price are bounded. The suggested diffusion approximation for the Markov chain allows establishing a convenient approximate formula for the studied characteristic.;

Item Type:	IHS Series
Keywords:	'Ergodic and irreducible Markov chains' 'Stationary distribution' 'Local limit theorem' 'Upper hedge' 'Upper rational price'
Classification Codes (e.g. JEL):	G12, G11, G13
Date Deposited:	26 Sep 2014 10:38
Last Modified:	27 Sep 2019 06:46
ISBN:	1605-7996
URI:	https://irihs.ihs.ac.at/id/eprint/1612

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