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2007•Journal of Hefei University of TechnologyRequires access

Insurance actuarial,pricing of exchange options with time-dependent parameters

Qizhi He

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Abstract

Under the conditions of the stock with or without dividends within the effective period,the problem of exchange option pricing with time-dependent parameters are discussed by using the approach of insurance actuarial pricing and the martingale method respectively.The Black-Scholes option pricing formulas with constant parameters are given as a special example.The relation between the two pricing methods is analyzed.It is thought that insurance actuarial pricing leads to arbitrage under general conditions.

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What this paper is about

Under the conditions of the stock with or without dividends within the effective period,the problem of exchange option pricing with time-dependent parameters are discussed by using the approach of insurance actuarial pricing and the martingale method respectively.The Black-Scholes option pricing formulas with constant parameters are given as a special example.The relation between the two pricing methods is analyzed.It is thought that insurance actuarial pricing leads to arbitrage under general conditions.

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Available abstract

Under the conditions of the stock with or without dividends within the effective period,the problem of exchange option pricing with time-dependent parameters are discussed by using the approach of insurance actuarial pricing and the martingale method respectively.The Black-Scholes option pricing formulas with constant parameters are given as a special example.The relation between the two pricing methods is analyzed.It is thought that insurance actuarial pricing leads to arbitrage under general conditions.

Key concepts: Martingale pricing, Rational pricing, Martingale (probability theory), Actuarial science, Black–Scholes model, Dividend, Monte Carlo methods for option pricing, Economics

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