A Simple Approach to CAPM and Option Pricing.

Cesari, Riccardo ; D`Adda, Carlo (2001) A Simple Approach to CAPM and Option Pricing. Bologna: Dipartimento di Scienze economiche DSE, p. 12. DOI 10.6092/unibo/amsacta/4881. In: Quaderni - Working Paper DSE (418). ISSN 2282-6483.
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Abstract

In this paper we propose a simple approach to asset valuation in terms of two characteristics, expected value and expected variability, and their distinct marginal contributions to the value of the market portfolio. The result is shown to correspond to Sharpe’s CAPM. We then show that pricing in terms of characteristics (or CAPM) applies to any asset and in particular to option valuation. A pricing formula corresponding to Black and Scholes’ no-arbitrage option pricing is obtained under the assumption of normal asset price distributions.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Cesari, Riccardo
D`Adda, Carlo
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ISSN
2282-6483
DOI
Deposit date
17 Mar 2016 11:37
Last modified
17 Mar 2016 11:37
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