Unique Option Pricing Measure with Neither Dynamic Hedging nor Complete Markets

Nassim Nicholas Taleb

Independent Researcher; NYU-Poly Institute; New England Complex Systems Institute

September 16, 2014

European Financial Management, Forthcoming

Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one, under any general probability distribution, bypassing the Black-Scholes-Merton dynamic hedging argument, and without the requirement of complete markets. We confirm that the heuristics used by traders for centuries are both more robust, more consistent, and more rigorous than held in the economics literature.

Number of Pages in PDF File: 8

Keywords: Derivatives, Options, Quantitative Finance

Open PDF in Browser Download This Paper

Date posted: May 14, 2014 ; Last revised: September 17, 2014

Suggested Citation

Taleb, Nassim Nicholas, Unique Option Pricing Measure with Neither Dynamic Hedging nor Complete Markets (September 16, 2014). European Financial Management, Forthcoming . Available at SSRN: http://ssrn.com/abstract=2435916 or http://dx.doi.org/10.2139/ssrn.2435916

Contact Information

Nassim Nicholas Taleb (Contact Author)
Independent Researcher ( email )
NYU-Poly Institute ( email )
Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States
New England Complex Systems Institute ( email )
24 Mt. Auburn St.
Cambridge, MA 02138
United States
Feedback to SSRN

Paper statistics
Abstract Views: 3,382
Downloads: 854
Download Rank: 17,197

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.454 seconds