Theory of rational option pricing

The following sections are included:

• Introduction

• Restrictions on rational option pricing

• Effects of dividends and changing exercise price

• Restrictions on rational put option oricina

• Rational option pricing along Black-Scholes lines

• An alternative derivation of the Black-Scholes model

• Extension of the model to include dividend payments and exercise price changes

• Valuing an American put option

• Valuing the “down and-out” call option

• Valuing a callable warrant

• Appendix 1

• Appendix 2

• References

• discussion: Option Pricing Theory and Its Applications

  • INTRODUCTION

  • THE MARTINGALE APPROACH TO OPTION PRICING

    • The Setup

    • Dynamic Spanning and the Martingale Representation Theorem

    • Some Generalizations

  • EXISTENCE AND PROPERTIES OF OPTIMAL STRATEGIES

  • APPLICATIONS TO CONTINGENT-CLAIM PRICING

  • NOTES

  • REFERENCES