Economics, Econometrics and Finance
3 years ago

New pricing model revolutionizes stock options, maximizing gains and minimizing losses!

Cambridge University Press eBooks
Pricing Contracts via Arbitrage
Sheldon M. Ross

Paper Summary

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The article discusses a model for pricing options to buy stocks in the future at a fixed price. It considers the present price of a stock, the possible future prices, and the cost of purchasing options and shares. The goal is to determine the fair price of these options and shares based on potential gains and losses. The findings show that the pricing of these contracts can be done using arbitrage, taking advantage of price differences to make a profit.