Bid-ask spread for exotic options under conic finance
Faculty of Sciences. Mathematics and Computer Science
New York, N.Y. :Springer, 2015
Innovations in quantitative risk management / Glau, K. [edit.]; Scherer, M. [edit.]; Zagst, R. [edit.]
Springer proceedings in mathematics & statistics; 99
University of Antwerp
This paper puts the concepts of model and calibration risks into the perspective of bid and ask pricing and marketed cash-flows which originate from the conic finance theory. Different asset pricing models calibrated to liquidly traded derivatives by making use of various plausible calibration methodologies lead to different risk-neutral measures which can be seen as the test measures used to assess the (un)acceptability of risks.