2. No arbitration opportunity condition
In this section, we explain the NA ( No Arbitrage) which is usually assumed in order to characterize the price of a derivative on a financial market. We use the notations and definitions from the previous paragraphs.
Definition 14. An arbitrage opportunity is a self-financed portfolio such that its initial capital is V 0 = 0, such that P( V T ≥ 0) = 1 (no risk of loss) and P( V T > 0)...
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No arbitration opportunity condition
Pricing a European option in a full market model with local volatility and neutral risk probability
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Bibliography
- (1) - BAPTISTE (J.), CARASSUS (L.), LÉPINETTE (E.) - Pricing without martingale measure - (2020). https://hal.archives-ouvertes.fr/hal-01774150 .
- (2) - BAPTISTE...
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