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Stochastic dominance option bounds and Nth order arbitrage opportunities

Research output: Working paper

Published

Standard

Stochastic dominance option bounds and Nth order arbitrage opportunities. / Huang, J.

Lancaster University : The Department of Accounting and Finance, 2004. (Accounting and Finance Working Paper Series).

Research output: Working paper

Harvard

Huang, J 2004 'Stochastic dominance option bounds and Nth order arbitrage opportunities' Accounting and Finance Working Paper Series, The Department of Accounting and Finance, Lancaster University.

APA

Huang, J. (2004). Stochastic dominance option bounds and Nth order arbitrage opportunities. (Accounting and Finance Working Paper Series). The Department of Accounting and Finance.

Vancouver

Huang J. Stochastic dominance option bounds and Nth order arbitrage opportunities. Lancaster University: The Department of Accounting and Finance. 2004. (Accounting and Finance Working Paper Series).

Author

Huang, J. / Stochastic dominance option bounds and Nth order arbitrage opportunities. Lancaster University : The Department of Accounting and Finance, 2004. (Accounting and Finance Working Paper Series).

Bibtex

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title = "Stochastic dominance option bounds and Nth order arbitrage opportunities",
abstract = "In this paper we first derive Nth order stochastic dominance option bounds from concurrently expiring options. We show that these bounds are given by pricing kernels that have piecewise constant (N - 2)th derivatives. When these option bounds are violated there are Nth order arbitrage opportunities interpreted as (weighted average) conditional expected return comparison. We then establish a way to explore these arbitrage opportunities in option markets.",
keywords = "Option bounds, option pricing, stochastic dominance",
author = "J Huang",
year = "2004",
language = "English",
series = "Accounting and Finance Working Paper Series",
publisher = "The Department of Accounting and Finance",
type = "WorkingPaper",
institution = "The Department of Accounting and Finance",

}

RIS

TY - UNPB

T1 - Stochastic dominance option bounds and Nth order arbitrage opportunities

AU - Huang, J

PY - 2004

Y1 - 2004

N2 - In this paper we first derive Nth order stochastic dominance option bounds from concurrently expiring options. We show that these bounds are given by pricing kernels that have piecewise constant (N - 2)th derivatives. When these option bounds are violated there are Nth order arbitrage opportunities interpreted as (weighted average) conditional expected return comparison. We then establish a way to explore these arbitrage opportunities in option markets.

AB - In this paper we first derive Nth order stochastic dominance option bounds from concurrently expiring options. We show that these bounds are given by pricing kernels that have piecewise constant (N - 2)th derivatives. When these option bounds are violated there are Nth order arbitrage opportunities interpreted as (weighted average) conditional expected return comparison. We then establish a way to explore these arbitrage opportunities in option markets.

KW - Option bounds

KW - option pricing

KW - stochastic dominance

M3 - Working paper

T3 - Accounting and Finance Working Paper Series

BT - Stochastic dominance option bounds and Nth order arbitrage opportunities

PB - The Department of Accounting and Finance

CY - Lancaster University

ER -