On the risk-adjusted pricing-methodology-based valuation of vanilla options and explanation of the volatility smile
We analyse a model for pricing derivative securities in the presence of both transaction costs as well as the risk from a volatile portfolio. The model is based on the Black-Scholes parabolic PDE in which transaction costs are described following the Hoggard, Whalley, and Wilmott approach. The risk...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Hindawi Limited
2005-01-01
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| Series: | Journal of Applied Mathematics |
| Online Access: | http://dx.doi.org/10.1155/JAM.2005.235 |