Price as a matter of choice and nonstochastic randomness

Economy – Quantitative Finance – Pricing of Securities

Scientific paper

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18 pages

Scientific paper

A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular cases. We show that in the general case of nonstochastic randomness the minimal expected profit of uncovered European option position is always negative. A version of delta hedge is proposed.

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