Then what's wrong with my proof?
Initially I was, but I thought you were saying more generally that put call parity falls apart under incomplete markets. In any event, it seems...
It's interesting how confused everyone is about the price distribution as opposed to the returns distribution(admittedly, at first glance I made...
Martinghoul, I don't see the issue with market completeness. Although there may be many possible risk neutral measures, the fair price for a...
No need for snide remarks about whether or not I understood your last post. I clearly stated that option prices are risk neutral expectations in...
The difference between "expected value of the option" and arbitrage free price is quite simple. This is because the arbitrage free price IS the...
Not true. There is no such assumption about mu. Black Scholes model under the physical measure(the real world dynamics of the stock) is quite...
There are no issues here, BS does not assume stocks grow at the risk free rate. Stocks are free to grow as they please, the point is that true...
Perhaps we are thinking of different ways to derive the put call parity relation, but I was referring to the most elementary MBA level argument...
To be clear, you seem to be referring to the physical(or true) probabilities here. That is fortunately not something you need to know to price an...
You are right that put call parity doesn't follow from the validity of the risk free rate, it follows from no arbitrage. However, the argument...
Let me start by noting that I really don't understand what you are doing. You started by saying you were running a Markowitz optimization, then...
Of course there are flaws in options pricing, and there always will be. The reason is that in order to price an option(or any derivative for...
This should be fairly easy to do in R.
Why not? Speed issues? Or are they just not well known?
Actually, this is an options forum. Would assume that anyone trading options tracks at the very minimum implied volatilities and the greeks, and...
bump
pretty sure you can do this in R then export to spreadsheet if you wish...if you don't program in R, its pretty easy to learn(very similar to...
Just look up the multidimensional taylor formula.
So...should i take that as a no? Everybody still using diffusion/jump diffusion then?
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