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The hidden martingale restriction in Gram‐Charlier option prices
Author(s) -
Corrado Charles
Publication year - 2007
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.20255
Subject(s) - gram , martingale (probability theory) , mathematics , economics , econometrics , mathematical economics , genetics , bacteria , biology
A hidden martingale restriction is developed for option pricing models based on Gram–Charlier expansions of the normal density function. The restriction is hidden behind a reduction in parameter space for the Gram–Charlier expansion coefficients. The resulting restriction is invisible in the option price. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27: 517–534, 2007