representation theorem
consequences
https://doi.org/10.1007/bf01210570
1991-03
respect
liability
option ons
limited liability
valuation
ON
true
portfolio
3-12
formula
spanning
characterization
uniform limit
integral representation theorem
assets
articles
first characterization
altenative characterizations
options
second characterization
Riesz spaces
security
theorem
sum
pricing implications
direct consequence
continuous sum
limit
Spanning, valuation and options
article
en
continuous option ons
Arrow-Debreu securities
We model the space of marketed assets as a Riesz space of commoditics. In this setting two altenative characterizations are given of the space of continuous options on a bounded asset,s, with limited liability. The first characterization represents every continuous option ons as the uniform limit of portfolios of calls ons. The second characterization represents an option as a continuous sum (or integral) of Arrow-Debreu securities, with respect tos. The pricing implications of these representations are explored. In particular, the Breeden-Littzenberger pricing formula is shown to be a direct consequence of the integral representation theorem.
continuous option
Breeden-Littzenberger pricing formula
calls ons
pricing formula
commoditics
representation
2021-12-01T19:07
1991-03-01
space
https://scigraph.springernature.com/explorer/license/
implications
Department of Economics, Stanford University, 94305, Stanford, CA, USA
Department of Economics, Stanford University, 94305, Stanford, CA, USA
Economic Theory
Economic Theory
0938-2259
Springer Nature
1432-0479
Brown
Donald J.
Econometrics
10.1007/bf01210570
doi
Applied Economics
dimensions_id
pub.1031639441
Ross
Stephen A.
1
School of Management, Yale University, 06520, New Haven, CT, USA
School of Management, Yale University, 06520, New Haven, CT, USA
1
Springer Nature - SN SciGraph project
Economics