Quantitative Finance, Vol. 5, No. 4, pp. 323-326, August 2005
5 Pages Posted: 9 May 2005 Last revised: 16 Nov 2012
Date Written: April 15, 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.
Keywords: Option Pricing, Replication, Valuation,
JEL Classification: G12, G13, N00
Suggested Citation: Suggested Citation
Derman, Emanuel and Taleb, Nassim Nicholas, The Illusions of Dynamic Replication (April 15, 2005). Quantitative Finance, Vol. 5, No. 4, pp. 323-326, August 2005. Available at SSRN: https://ssrn.com/abstract=720581