CAPM option pricing
Abstract
This paper extends the optionpricing equations of [Black and Scholes, 1973], [Jarrow and Madan, 1997] and [Husmann and Stephan, 2007]. In particular, we show that the length of the individual planning horizon is a determinant of an option's value. The derived pricing equations can be presented in terms of the Black and Scholes [1973. Journal of Political Economy 81, 637-654]option values which ensures an easy application in practice.
Journal Title
Finance Research Letters
Volume
8
Issue
4
Copyright Statement
© 2011 Elsevier. This is the author-manuscript version of this paper. Reproduced in accordance with the copyright policy of the publisher. Please refer to the journal's website for access to the definitive, published version.
Subject
Investment and Risk Management
Banking, Finance and Investment