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

Filtration Hull Volatility Hedging Rebalanced 

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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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