Description: This book examines whether continuous-time models in frictionless financial economies can be well approximated by discrete-time models. It specifically looks to answer the question: in what sense and to what extent does the famous Black-Scholes-Merton (BSM) continuous-time model of financial markets idealize more realistic discrete-time models of those markets? While it is well known that the BSM model is an idealization of discrete-time economies where the stock price process is driven by a binomial random walk, it is less known that the BSM model idealizes discrete-time economies whose stock price process is driven by more general random walks. Starting with the basic foundations of discrete-time and continuous-time models, David M. Kreps takes the reader through to this important insight with the goal of lowering the entry barrier for many mainstream financial economists, thus bringing less-technical readers to a better understanding of the connections between BSM and nearby discrete-economies.
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EAN: 9781108486361
UPC: 9781108486361
ISBN: 9781108486361
MPN: N/A
Book Title: The Black–Scholes–Merton Model as an Idealization
Item Length: 23.5 cm
Number of Pages: 214 Pages
Language: English
Publication Name: The Black-Scholes-Merton Model As an Idealization of Discrete-Time Economies
Publisher: Cambridge University Press
Publication Year: 2019
Subject: Economics, Accounting
Item Height: 235 mm
Item Weight: 430 g
Type: Textbook
Author: David M. Kreps
Series: Econometric Society Monographs
Item Width: 157 mm
Format: Hardcover
