Abstract

http://ssrn.com/abstract=2435916
 


 



Risk Neutral Option Pricing with Neither Dynamic Hedging Nor Complete Markets: A Measure-Theoretic Proof


Nassim Nicholas Taleb


New York University-Poly School of Engineering

May 12, 2014


Abstract:     
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 of 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 and more rigorous than held in the economics literature.

Number of Pages in PDF File: 3

Keywords: Derivatives, Options, Quantitative Finance

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Date posted: May 14, 2014  

Suggested Citation

Taleb, Nassim Nicholas, Risk Neutral Option Pricing with Neither Dynamic Hedging Nor Complete Markets: A Measure-Theoretic Proof (May 12, 2014). Available at SSRN: http://ssrn.com/abstract=2435916 or http://dx.doi.org/10.2139/ssrn.2435916

Contact Information

Nassim Nicholas Taleb (Contact Author)
New York University-Poly School of Engineering ( email )
Brooklyn, NY 11201
United States

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