Derivative pricing with virtual arbitrage

Simple item page
dc.creatorIlinski, Kirill
dc.creatorStepanenko, Alexander
dc.date1999-02-03
dc.date.accessioned2026-07-07T12:07:09Z
dc.date.available2026-07-07T12:07:09Z
dc.descriptionIn this paper we derive an effective equation for derivative pricing which accounts for the presence of virtual arbitrage opportunities and their elimination by the market. We model the arbitrage return by a stochastic process and find an equation for the average derivative price. This is an integro-differential equation which, in the absence of the virtual arbitrage or for an infinitely fast market reaction, reduces to the Black-Scholes equation. Explicit formulas are obtained for European call and put vanilla options.
dc.descriptionLatex, 10 pages
dc.identifierhttps://arxiv.org/abs/cond-mat/9902046
dc.identifierhttp://arxiv.org/abs/cond-mat/9902046
dc.identifier.urihttp://salesiana.dossiersoluciones.com/handle/123456789/208875
dc.subjectStatistical Mechanics
dc.subjectPricing of Securities
dc.titleDerivative pricing with virtual arbitrage
dc.typetext

Files

Collections

arXiv