Title :
Stochastic Stock Process and Its Option Pricing for a Risk Aversion Stock Market
Author :
Wang, Jun ; Wang, Juan ; Fan, Bingli
Author_Institution :
Inst. of Financial Math. & Financial Eng. Coll. of Sci., Beijing Jiaotong Univ., Beijing
Abstract :
In this paper, we consider the contingent claim pricing and hedging of European call option. The theory of stock trading volume is applied to describe and study the fluctuations of stock prices in a stock market, and we obtain the formula for pricing a European call option. Then we discuss the range of parameters of the formula in a risk-averse market, and give the corresponding option pricing bounds. In this work, stochastic analysis and stopping theory are used to study and show the risk- neutral probability distribution for the financial model, further we study the European call option for a risk-averse stock market.
Keywords :
pricing; probability; share prices; stock markets; European call option; contingent claim pricing; option pricing; risk aversion stock market; risk-neutral probability distribution; stochastic stock process; stock trading volume; Contracts; Educational institutions; Fluctuations; Information security; Investments; Mathematics; Pricing; Risk analysis; Stochastic processes; Stock markets;
Conference_Titel :
Advanced Management of Information for Globalized Enterprises, 2008. AMIGE 2008. IEEE Symposium on
Conference_Location :
Tianjin
Print_ISBN :
978-1-4244-3694-1
Electronic_ISBN :
978-1-4244-2972-1
DOI :
10.1109/AMIGE.2008.ECP.13
