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Article overview
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Pricing contingent claims with short selling bans | | Guiyuan Ma
; Song-Ping Zhu
; Ivan Guo
; | | Date: |
11 Oct 2019 | | Abstract: | Guo and Zhu (2017) recently proposed an equal-risk pricing approach to the
valuation of contingent claims when short selling is completely banned and two
elegant pricing formulae are derived in some special cases. In this paper, we
establish a unified framework for this new pricing approach so that its range
of application can be significantly expanded. The main contribution of our
framework is that it not only recovers the analytical pricing formula derived
by Guo and Zhu (2017) when the payoff is monotonic, but also numerically
produces equal-risk prices for contingent claims with non-monotonic payoffs, a
task which has not been accomplished before. Furthermore, we demonstrate how a
short selling ban affects the valuation of contingent claims by comparing
equal-risk prices with Black-Scholes prices. | | Source: | arXiv, 1910.4960 | | Services: | Forum | Review | PDF | Favorites | |
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