Seminars & Colloquia Calendar
No-Arbitage Option Pricing through Risk-Neutral Measures
Location: Hill 705
Date & time: Friday, 15 February 2019 at 1:30PM - 2:30PM
Abstract: As a step toward multi-period trees and, eventually, stochastic differential equations, this talk will develop the no-arbitrage price of a derivative security using a one-period binomial tree model. The price will be shown to be an expectation, under the measure making the underlying security’s discounted price process a martingale, of the discounted value of the portfolio replicating the derivative’s payoff. If time permits, multi-period trees and American options will be discussed.