Abstract

This paper describes and interprets pathologies associated with long-dated options. Contrary to naive financial intuition, binary calls with almost certain large payoffs may have a value close to zero; conversely, puts appear to be expensive versus zero-coupon bonds. These results are interpreted in a joint CAPM/Black-Scholes framework.

Full Text
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

Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.