Option Pricing under Generic Market Conditions

7 Pages Posted: 29 Jan 2021

Date Written: December 1, 2020

Abstract

A Black-Scholes replicating strategy with continuous revisions is no longer optimal or possible in the presence of transaction costs and discrete trading. This paper explores theoretical and practical solutions to revision frequency in a modified replicating strategy.

Keywords: Options, Pricing, Transaction Costs, Discrete Trading

JEL Classification: G12

Suggested Citation

Paolucci, Roman, Option Pricing under Generic Market Conditions (December 1, 2020). Available at SSRN: https://ssrn.com/abstract=3745703 or http://dx.doi.org/10.2139/ssrn.3745703

Roman Paolucci (Contact Author)

James Madison University ( email )

Harrisonburg, VA 22807
United States

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