Tagged Questions
6
votes
1answer
187 views
Why does the price of a derivative not depend on the derivative with which you hedge volatility risk?
I'm trying to derive the valuation equation under a general stochastic volatility model.
What one can read in the literature is the following reasoning:
One considers a replicating self-financing ...
6
votes
0answers
265 views
Probability distribution of maximum value of binary option?
A binary option with payout \$0/\$100 is trading at \$30 with 12 hours to
expiration.
Assuming the underlying follows a geometric Brownian motion (hence volatility remains constant), what ...
