Questions tagged [proof]

The tag has no usage guidance.

Filter by
Sorted by
Tagged with
4 votes
1 answer

European Call price for an asset with mean reverting (Vasicek model) dynamics

Let's look at a stock with a mean reverting price dynamics: $$dS_t = a(S-S_0)dt + \sigma dW_t$$ If we let $\sigma=0.25$ and $a=-0.5$ then the variance of this process is: $$Var(S_t) = 0.199\sim0.2$$ ...
Lisa's user avatar
  • 127
1 vote
1 answer

Proof of Calendar-Spread-Inequality

The Calendar-Spread-Inequality compares the prices of two European Call Options on the same underlying non-dividend-paying stock, but with different maturities $T_1<T_2$. Denote the value of a call ...
TheHunter's user avatar
  • 133
1 vote
1 answer

Prove Subadditivity - Entropic Value at Risk

Any insight in how to prove the following risk measure is subadditive? $\rho_{1-\alpha}(X) = \inf_{z>0}\{z^{-1}\ln(\frac{E[e^{zX}]}{\alpha})\}$, with $\alpha \in ]0,1]$ I want to prove it is a ...
Amy Zhang's user avatar
1 vote
1 answer

Deriving Delta Hedge error in the B-S setup (part 2)

In this paper paper page 16-19 by Davis and this discussion derivation of the hedging error in a black scholes setup, the derivation of the delta hedging error in the Black Scholes model is discussed. ...
Sanjay's user avatar
  • 1,627