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Option Pricing

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Handbook of Financial Time Series

Abstract

This chapter reviews basic concepts of derivative pricing in financial mathematics.We distinguish market prices and individual values of a potential seller. We focus mainly on arbitrage theory. In addition, two hedgingbased valuation approaches are discussed. The first relies on quadratic hedging whereas the second involves a first-order approximation to utility indifference prices.

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  1. Christian-Albrechts-Universität zu Kiel, Christian-Albrechts-Platz 4, D-24098, Kiel, Germany

    Jan Kallsen

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  1. Jan Kallsen
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    © 2009 Springer-Verlag Berlin Heidelberg

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    Kallsen, J. (2009). Option Pricing. In: Mikosch, T., Kreiß, JP., Davis, R., Andersen, T. (eds) Handbook of Financial Time Series. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-71297-8_26

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