Abstract
Contrary to the claims made by several authors, a financial market model in which the price of a risky security follows a reflected geometric Brownian motion is not arbitrage-free. In fact, such models violate even the weakest no-arbitrage condition considered in the literature. Consequently, they do not admit numéraire portfolios or equivalent risk-neutral probability measures, which makes them unsuitable for contingent claim valuation. Unsurprisingly, the published option pricing formulae for such models violate classical no-arbitrage bounds.
Full Text 
Sign-in/Register to access full text options
Sign-in/Register to access full text options 
Paper version not known
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
