semigroup theory applied to options半群理论应用于选择.pdfVIP

SEMIGROUP THEORY APPLIED TO OPTIONS D. I. CRUZ-BÁEZ AND J. M. GONZÁLEZ-RODRÍGUEZ Received 5 November 2001 and in revised form 5 March 2002 Black and Scholes (1973) proved that under certain assumptions about the market place, the value of a European option, as a function of the cur- rent value of the underlying asset and time, verifies a Cauchy problem. We give new conditions for the existence and uniqueness of the value of a European option by using semigroup theory. For this, we choose a suitable space that verifies some conditions, what allows us that the op- erator that appears in the Cauchy problem is the infinitesimal generator of a C0-semigroup T (t). Then we are able to guarantee the existence and uniqueness of the value of a European option and we also achieve an explicit expression of that value. 1. Introduction In this section we recall the basic concepts of options theory [10]. The value of a European call option is a contract verifying that at a prescribed time in the future, known as the expiry date, the owner of the option may purchase a prescribed asset, known as the underlying asset or, briefly, the underlying, for a prescribed amount, known as the exercise price or strike price. The trading options and their theoretical study have been known for long, but only since the early 1970s they have experimented a spec- tacular development. The main purpose in option studies is to find a fair arbitrage free price for these instruments. The first solution to the problem was given by Bachelier in 1900 [1, page 17]. However, in the early 1970s a complete option valuation based on equilibrium theoretical hypothesis for speculative prices was finally developed. The works of c Copyright 2002 Hindawi Publishing Corporation Journal of Applied Mathematics 2:3 (2002) 131–139 2000 Mathematics Subject Classification: 35K15, 44A15, 47D06, 91B28 URL: /10.1155/S1110757 132 Semigroup theory applie