Option Pricing: A Simplified Approach (1979)
| Venue: | Journal of Financial Economics |
| Citations: | 1009 - 9 self |
BibTeX
@ARTICLE{Cox79optionpricing:,
author = {John C. Cox and Stephen A. Ross and Mark Rubinstein},
title = {Option Pricing: A Simplified Approach},
journal = {Journal of Financial Economics},
year = {1979},
pages = {229--264}
}
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Abstract
This paper presents a simple discrete-time model for valumg optlons. The fundamental econonuc principles of option pricing by arbitrage methods are particularly clear In this setting. Its development requires only elementary mathematics, yet it contains as a special limiting case the celebrated Black-&holes model, which has previously been derived only by much more difficult methods. The basic model readily lends itself to generalization in many ways. Moreover, by its very constructlon, it gives rise to a simple and efficient numerical procedure for valumg optlons for which premature exercise may be optimal. 1.
