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Sep
30
awarded  Explainer
Jul
12
comment Prove that the binomial algorithm implies the arbitrage free price at t=0 of a T-claim
Usually you write $E^Q[V_i]$ to denote the expectation under the martingale measure, if it is not clear from the context.
Jul
12
comment Prove that the binomial algorithm implies the arbitrage free price at t=0 of a T-claim
Yes, exactly! A naive version of total expectation is usually introduced in a first class in probability theory. See Wikipedia for more info, if you're interested: en.wikipedia.org/wiki/Law_of_total_expectation
Jul
11
answered Prove that the binomial algorithm implies the arbitrage free price at t=0 of a T-claim
Jul
4
answered Which is the correct definition of arbitrage?
Jul
4
awarded  Commentator
Jul
4
comment Inconsistent Definition of Arbitrage in Bjork?
@BCLC: Yes, it should be >0. Thanks for pointing that out! Since they are definitions they cannot be right or wrong. However the second one makes more sense, and is the one most commonly used in the literature.
Jul
4
revised Inconsistent Definition of Arbitrage in Bjork?
edited body
Jul
4
comment Inconsistent Definition of Arbitrage in Bjork?
@KaapstadKwant: Thanks for pointing out my error!
Jul
4
comment Inconsistent Definition of Arbitrage in Bjork?
Hello BCLC, I corrected my answer since the first one was incorrect.
Jul
4
revised Inconsistent Definition of Arbitrage in Bjork?
Corrected an incorrect answer
Jul
4
answered Inconsistent Definition of Arbitrage in Bjork?
Jul
4
revised Inconsistent Definition of Arbitrage in Bjork?
Added details to avoid confusion!
Jul
4
suggested suggested edit on Inconsistent Definition of Arbitrage in Bjork?
Jul
3
comment Self-financing and Black-Scholes-Merton formula
@emcor: It was a typo, S instead of B. Now everything is correct, right?
Jul
3
comment Self-financing and Black-Scholes-Merton formula
@athos: Acctually it only applies to simple European derivatives i.e. with payoff $Y= h(S(T))$ due to the Markov assumption. "Your" method is much more general!
Jul
3
revised Self-financing and Black-Scholes-Merton formula
edited body
Jul
2
comment Self-financing and Black-Scholes-Merton formula
Hi, emcor. I dropped one step that was unnecessary and confusing. Now it is just plain Itô, right?
Jul
2
revised Self-financing and Black-Scholes-Merton formula
deleted 22 characters in body
Jul
2
answered Self-financing and Black-Scholes-Merton formula