On European option pricing under partial information
Meng Wu; Jue Lu; Nan-jing Huang
Applications of Mathematics (2016)
- Volume: 61, Issue: 1, page 61-77
- ISSN: 0862-7940
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topWu, Meng, Lu, Jue, and Huang, Nan-jing. "On European option pricing under partial information." Applications of Mathematics 61.1 (2016): 61-77. <http://eudml.org/doc/276114>.
@article{Wu2016,
abstract = {We consider a European option pricing problem under a partial information market, i.e., only the security's price can be observed, the rate of return and the noise source in the market cannot be observed. To make the problem tractable, we focus on gap option which is a generalized form of the classical European option. By using the stochastic analysis and filtering technique, we derive a Black-Scholes formula for gap option pricing with dividends under partial information. Finally, we apply filtering technique to solve a utility maximization problem under partial information through transforming the problem under partial information into the classical problem.},
author = {Wu, Meng, Lu, Jue, Huang, Nan-jing},
journal = {Applications of Mathematics},
keywords = {option pricing; European option; partial information; backward stochastic differential equation; option pricing; European option; partial information; backward stochastic differential equation},
language = {eng},
number = {1},
pages = {61-77},
publisher = {Institute of Mathematics, Academy of Sciences of the Czech Republic},
title = {On European option pricing under partial information},
url = {http://eudml.org/doc/276114},
volume = {61},
year = {2016},
}
TY - JOUR
AU - Wu, Meng
AU - Lu, Jue
AU - Huang, Nan-jing
TI - On European option pricing under partial information
JO - Applications of Mathematics
PY - 2016
PB - Institute of Mathematics, Academy of Sciences of the Czech Republic
VL - 61
IS - 1
SP - 61
EP - 77
AB - We consider a European option pricing problem under a partial information market, i.e., only the security's price can be observed, the rate of return and the noise source in the market cannot be observed. To make the problem tractable, we focus on gap option which is a generalized form of the classical European option. By using the stochastic analysis and filtering technique, we derive a Black-Scholes formula for gap option pricing with dividends under partial information. Finally, we apply filtering technique to solve a utility maximization problem under partial information through transforming the problem under partial information into the classical problem.
LA - eng
KW - option pricing; European option; partial information; backward stochastic differential equation; option pricing; European option; partial information; backward stochastic differential equation
UR - http://eudml.org/doc/276114
ER -
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