Arbitrages and Arrow-Debreu Prices

Barone, Gaia (2008) Arbitrages and Arrow-Debreu Prices. Rivista di Politica Economica, 98 (6). pp. 43-78.

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Abstract

The goal of this work is to check that there are no arbitrage opportunities in the CBOE market for S&P500 options and to extract from these options’ quotes the state-price density consistent with the Merton model. The structure of the article is as follows: in Section 2 we examine the relations between arbitrages and Arrow-Debreu prices; in Section 3 we consider two models which seem to be consistent with the market prices of index options: the CEV model and the Merton model; finally, in Section 4 we estimate the state-price density consistent with the Merton-Geske model. Some conclusions follow.

Item Type:	Article
Subjects:	H Social Sciences > HG Finance
Divisions:	School of Business > Staff Research and Publications
Depositing User:	Caoimhe Ní Mhaicín
Date Deposited:	13 Sep 2018 11:13
Last Modified:	13 Sep 2018 11:13
URI:	https://norma.ncirl.ie/id/eprint/3113

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