The Black-Scholes-Merton Model as an Idealization of Discrete-Time Economies
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The Black-Scholes-Merton Model as an Idealization of Discrete-Time Economies

The Black-Scholes-Merton Model as an Idealization of Discrete-Time Economies


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About the Book

This book examines whether continuous-time models in frictionless financial economies can be well approximated by discrete-time models. It specifically looks to answer the question: in what sense and to what extent does the famous Black-Scholes-Merton (BSM) continuous-time model of financial markets idealize more realistic discrete-time models of those markets? While it is well known that the BSM model is an idealization of discrete-time economies where the stock price process is driven by a binomial random walk, it is less known that the BSM model idealizes discrete-time economies whose stock price process is driven by more general random walks. Starting with the basic foundations of discrete-time and continuous-time models, David M. Kreps takes the reader through to this important insight with the goal of lowering the entry barrier for many mainstream financial economists, thus bringing less-technical readers to a better understanding of the connections between BSM and nearby discrete-economies.


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Product Details
  • ISBN-13: 9781108707657
  • Publisher: Cambridge University Press
  • Binding: Paperback
  • Language: English
  • Returnable: Y
  • Spine Width: 12 mm
  • Width: 164 mm
  • ISBN-10: 1108707653
  • Publisher Date: 07 Nov 2019
  • Height: 228 mm
  • No of Pages: 214
  • Series Title: Econometric Society Monographs
  • Weight: 367 gr


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The Black-Scholes-Merton Model as an Idealization of Discrete-Time Economies
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The Black-Scholes-Merton Model as an Idealization of Discrete-Time Economies
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