3 research outputs found
Option Pricing with Delayed Information
We propose a model to study the effects of delayed information on option
pricing. We first talk about the absence of arbitrage in our model, and then
discuss super replication with delayed information in a binomial model,
notably, we present a closed form formula for the price of convex contingent
claims. Also, we address the convergence problem as the time-step and delay
length tend to zero and introduce analogous results in the continuous time
framework. Finally, we explore how delayed information exaggerates the
volatility smile