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The Cox-Ross-Rubinstein Model

  • Marek Musiela
  • Marek Rutkowski
Part of the Applications of Mathematics book series (SMAP, volume 36)

Abstract

A European call option written on one share of a stock S, which pays no dividends during the option’s lifetime, is formally equivalent to the claim X whose payoff at time T is contingent on the stock price S T , and equals
$$ X = {({S_T} - K)^ + }\mathop {{\text{ }} = }\limits^{def} \max \{ {S_T} - {\mkern 1mu} K,0\} . $$
(2.1)

Keywords

Stock Price Call Option Contingent Claim European Call Option Proportional Transaction Cost 
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.

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Copyright information

© Springer-Verlag Berlin Heidelberg 1997

Authors and Affiliations

  • Marek Musiela
    • 1
  • Marek Rutkowski
    • 2
  1. 1.School of MathematicsUniversity of New South WalesSydneyAustralia
  2. 2.Institute of MathematicsPolitechnika WarszawskaWarszawaPoland

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