Some new results on when extra risk strictly increases an option's value

Huang, James and Zhang, Deyuan (2013) Some new results on when extra risk strictly increases an option's value. Journal of Futures Markets, 33 (1). pp. 44-54. ISSN 0270-7314

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Abstract

In this paper, we present some new results on when extra risk strictly increases an option's value. We give a necessary and sufficient condition for a mean-preserving spread to strictly increase an option's value. We also give a necessary and sufficient condition for a risk change to strictly increase the values of options with strike prices in an open interval while preserving the values of all other options. These two results significantly improve the results given by Rasmusen (2007) (When does extra risk strictly increase an option's value? Review of Financial Studies, 20, 1647–1667).

Item Type:
Journal Article
Journal or Publication Title:
Journal of Futures Markets
Uncontrolled Keywords:
/dk/atira/pure/researchoutput/libraryofcongress/hf5601
Subjects:
?? ACCOUNTING AND FINANCEFINANCEBUSINESS, MANAGEMENT AND ACCOUNTING(ALL)ECONOMICS AND ECONOMETRICSACCOUNTINGHF5601 ACCOUNTING ??
ID Code:
58901
Deposited By:
Deposited On:
05 Oct 2012 09:31
Refereed?:
Yes
Published?:
Published
Last Modified:
17 Sep 2023 01:13