Journal of Finance Vol. 51 No. 5 1996
General Properties of Option Prices
Abstract
When the underlying price process is a one-dimensional diffusion, as well as in certain restricted stochastic volatility settings, a contingent claim's delta is bounded by the infimum and supremum of its delta at maturity. Further, if the claim's payoff is convex (concave), the claim's price is a convex (concave) function of the underlying asset's value. However, when volatility is less specialized, or when the underlying process is discontinuous or non-Markovian, a call's price can be a decreasing, concave function of the underlying price over some range, increasing with the passage of time, and decreasing in the level of interest rates.
- DOI
- 10.2307/2329530
- Volume
- 51
- Issue
- 5
- Pages
- 1573
- Sources
- openalex crossref