A Game Theory Analysis of Options Contributions to the Theory of Financial Intermediation in Continuous Time

Modem option pricing theory was developed in the late sixties and early seventies by F. Black, R. C. Merton and M. Scholes as an analytical tool for pricing and hedging option contracts and over-the-counter warrants. However, already in the seminal paper by Black and Scholes, the applicability of th...

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Bibliographic Details
Main Author: Ziegler, Alexandre
Format: eBook
Language:English
Published: Berlin, Heidelberg Springer Berlin Heidelberg 1999, 1999
Edition:1st ed. 1999
Series:Lecture Notes in Economics and Mathematical Systems
Subjects:
Online Access:
Collection: Springer Book Archives -2004 - Collection details see MPG.ReNa
Description
Summary:Modem option pricing theory was developed in the late sixties and early seventies by F. Black, R. C. Merton and M. Scholes as an analytical tool for pricing and hedging option contracts and over-the-counter warrants. However, already in the seminal paper by Black and Scholes, the applicability of the model was regarded as much broader. In the second part of their paper, the authors demonstrated that a levered firm's equity can be regarded as an option on the value of the firm, and thus can be priced by option valuation techniques. A year later, Merton showed how the default risk structure of corporate bonds can be determined by option pricing techniques. Option pricing models are now used to price virtually the full range of financial instruments and financial guarantees such as deposit insurance and collateral, and to quantify the associated risks. Over the years, option pricing has evolved from a set of specific models to a general analytical framework for analyzing the production process of financial contracts and their function in the financial intermediation process in a continuous time framework. However, virtually no attempt has been made in the literature to integrate game theory aspects, i. e. strategic financial decisions of the agents, into the continuous time framework. This is the unique contribution of the thesis of Dr. Alexandre Ziegler. Benefiting from the analytical tractability of continuous time models and the closed form valuation models for derivatives, Dr
Physical Description:XIV, 150 p online resource
ISBN:9783662215890