The Illusions of Dynamic Replication
Nassim Nicholas Taleb
New York University-Poly School of Engineering
April 15, 2005
Quantitative Finance, Vol. 5, No. 4, pp. 323-326, August 2005
While modern financial theory holds that options values are derived by dynamic replication, they can be correctly valued far more simply by long familiar static and actuarial arguments that combine stochastic price evolution with the no-arbitrage relation between cash and forward contracts.
Number of Pages in PDF File: 5
Keywords: Option Pricing, Replication, Valuation,
JEL Classification: G12, G13, N00Accepted Paper Series
Date posted: May 9, 2005 ; Last revised: November 16, 2012
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