General Properties of Option Prices

J. OF FINANCE, Vol. 51 No. 5, December 1996

Posted: 10 Oct 1996

See all articles by Yaacov Z. Bergman

Yaacov Z. Bergman

Hebrew University of Jerusalem - Jerusalem School of Business Administration

Bruce D. Grundy

University of Melbourne

Zvi Wiener

Hebrew University of Jerusalem - Jerusalem School of Business Administration

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Abstract

When the underlying price process is a one-dimensional diffusion, as well as in certain restricted stochastic volatility settings, a contingent claim's delta is bounded by the infimum and supremum of its delta at maturity. Further, if the claim's payoff is convex (concave), the claim's price is a convex (concave) function of the underlying asset's value. However when volatility is less specialized, or when the underlying process is discontinuous or non-Markovian, a call's price can be a decreasing, concave function of the underlying price over some range, increasing with the passage of time, and decreasing in the level of interest rates.

JEL Classification: G13

Suggested Citation

Bergman, Yaacov Z. and Grundy, Bruce D. and Wiener, Zvi, General Properties of Option Prices. J. OF FINANCE, Vol. 51 No. 5, December 1996, Available at SSRN: https://ssrn.com/abstract=7800

Yaacov Z. Bergman

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem, 91905
Israel
(+972)-2-588-3116 (Phone)
(+972)-2-588-1341 (Fax)

Bruce D. Grundy (Contact Author)

University of Melbourne ( email )

Faculty of Economics & Commerce
Department of Finance
Victoria, 3010
Australia
+61 3 8344 9083 (Phone)
+61 3 8344 6914 (Fax)

Zvi Wiener

Hebrew University of Jerusalem - Jerusalem School of Business Administration ( email )

Mount Scopus
Jerusalem, 91905
Israel
(972)-2-588-3049 (Phone)
(972)-2-588-3105 (Fax)

HOME PAGE: http://pluto.mscc.huji.ac.il/~mswiener/zvi.html

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