Extension and comparison of option arbitrage pricing methods

Based upon discrete time models, this paper first presents the concepts of the traditional arbitrage, the e arbitrage and the deterministic arbitrage, and introduces the three methods of option pricing that use the different concepts. After comparing the three option pricing methods, we point out the differences and connections between the methods and their application areas. Finally it is shown by examples that the traditional arbitrage pricing theory is only suitable for complete markets, and the deterministic arbitrage and e arbitrage option pricing methods is suitable for both complete markets and incomplete financial markets.