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On the expected payoff and true probability of exercise of European options

Research output: Contribution to Journal/MagazineJournal articlepeer-review

<mark>Journal publication date</mark>1/01/2001
<mark>Journal</mark>Applied Economics Letters
Issue number4
Number of pages3
Pages (from-to)269-271
Publication StatusPublished
<mark>Original language</mark>English


The continuous-time formula for expected payoff to holding an option, which nests several major pricing tools, is derived. It is shown also that under current market conditions the true exercise probability, script N(d 4), lies halfway between the two more familiar terms: script N(d 1) and script N(d2).