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Bounds for the price of options

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Applied Stochastic Analysis

Part of the book series: Lecture Notes in Control and Information Sciences ((LNCIS,volume 177))

Abstract

In this paper, we present an application of stochastic calculus to show “ the robustness of the Black-Scholes formula”. The Black-Scholes formula is extensively used in order to determine the price of financial products called options. This formula is valid only when the parameters (which can, in general, be stochastic and time-dependent) are constant or deterministic. When this is not the case, this formula is still used by means of an approximation at time t of these parameters, without theoretical justification. We prove in this paper that this methodology is correct in some sense.

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Bibliography

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Author information

Authors and Affiliations

  1. Cmla. Ens De Cachan, F 94235, Cachan Cedex

    Monique Jeanblanc-Picque

  2. Laboratoire de probabilités Tour 56 3ième étage, 4, Place Jussieu, F 75230, Paris Cedex 05

    Nicole El Karoui

  3. Mitsubishi Finance International, 6, Broadgate, EC 2M 2AA, London

    Ravi Viswanathan

Authors
  1. Monique Jeanblanc-Picque
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  2. Nicole El Karoui
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  3. Ravi Viswanathan
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Editor information

Ioannis Karatzas Daniel Ocone

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© 1992 Springer-Verlag

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Jeanblanc-Picque, M., El Karoui, N., Viswanathan, R. (1992). Bounds for the price of options. In: Karatzas, I., Ocone, D. (eds) Applied Stochastic Analysis. Lecture Notes in Control and Information Sciences, vol 177. Springer, Berlin, Heidelberg. https://doi.org/10.1007/BFb0007060

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  • DOI: https://doi.org/10.1007/BFb0007060

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  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-540-55296-3

  • Online ISBN: 978-3-540-47017-5

  • eBook Packages: Springer Book Archive

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