Advertisement

Introduction to Option Management

  • Jürgen FrankeEmail author
  • Wolfgang Karl Härdle
  • Christian Matthias Hafner
Chapter
Part of the Universitext book series (UTX)

Abstract

In this section we consider the fundamental notion of no–arbitrage. An arbitrage opportunity arises if it is possible to make a riskless profit. In an ideal financial market, in which all investors dispose of the same pieces of information and in which all investors can react instantaneously, there should not be any arbitrage opportunity. Since otherwise each investor would try to realize the riskless profit instantaneously. The resulting transactions would change the prices of the involved financial instruments such that the arbitrage opportunity disappears.

Keywords

Interest Rate Stock Price Future Price American Option Future Contract 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Jürgen Franke
    • 1
    Email author
  • Wolfgang Karl Härdle
    • 2
    • 3
  • Christian Matthias Hafner
    • 4
  1. 1.FB MathematikTU KaiserslauternKaiserslauternGermany
  2. 2.Ladislaus von Bortkiewicz Chair of Statistics C.A.S.E. Centre for Applied Statistics and Economics School of Business and EconomicsHumboldt-Universität zu BerlinBerlinGermany
  3. 3.Graduate Institute of StatisticsNational Central UniversityJhongliTaiwan
  4. 4.Inst. StatistiqueUniversité Catholique de LouvainLeuven-la-NeuveBelgium

Personalised recommendations