2014/10/29 by Hyungbin Park, Park, Hyungbin
Economics, Econometrics and Finance · Physics and Astronomy · #Advanced Thermodynamics and Statistical Mechanics #Economic theories and models #FOS: Economics and business #Mathematical Finance (q-fin.MF) #Pricing of Securities (q-fin.PR) #Stochastic processes and financial applications #q-fin.MF #q-fin.PR
paper · pdf · doi:10.48550/arxiv.1410.8160
This paper has been withdrawn by the author due to several errors like Proposition 3.2 and 3.3
openalex publication_date 2014/10/29 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
In this article, we investigate the behavior of long-term options. In many cases, option prices follow an exponential decay (or growth) rate for further maturity dates. We determine under what conditions option prices are characterized by this property. To see this, we use the martingale extraction method through which a pricing operator is transformed into a semigroup operator, which is easier to address. We also explore notions of hedging long-term options. Hedging is an attempt to reduce market risks, and we investigate the price sensitivities (Greeks) with respect to such risks, which are typically repre- sented by variations in the underlying process of an option. We combine the Malliavin calculus with the martingale extraction method to analyze Greeks. We see that the ratios between Greeks and the option price are expressed in a simple form in the long term.