Market Incompleteness and Imperfections Challenge Traditional Option Pricing Theories
The article discusses how option pricing works in financial markets. It explores situations where trading strategies may not work perfectly due to market incompleteness or trading costs. This can affect the accuracy of option prices. The researchers show that in these cases, certain restrictions on pricing can still be identified. The study looks at different market scenarios to illustrate these concepts and highlights real-world examples where these restrictions are not always met.