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| Tekijä: | Constantinides, G.M. Perrakis, S. |
| Otsikko: | Stochastic dominance bounds on American option prices in markets with frictions |
| Lehti: | Review of finance
2007 : MAR, VOL. 11:1, p. 71-115 |
| Asiasana: | stock markets stock exchanges options securities trading stochastic processes models USA |
| Kieli: | eng |
| Tiivistelmä: | This paper derives equilibrium restrictions on the range of the transaction prices of American options on the stock market index and index futures. Trading over the lifetime of the options is accounted for, in contrast to earlier single-period results. The market is allowed to be incomplete and imperfect due to the presence of proportional transaction costs in trading the underlying security and due to bid-ask spreads in option prices. The bounds may be derived for any given probability distribution of the return of the underlying security and admit price jumps and stochastic volatility etc. |
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