volume 3, issue 2, P321-409 1997
DOI: 10.1017/s1357321700004980
View full text
|
|
Share
R.S. Clarkson

Abstract: ABSTRACTUsing an empirical approach to capital market returns analogous to that used for mortality rates by Halley more than three centuries ago to establish life assurance on a sound and scientific footing, a theory of option pricing is built up in terms of the same three key components as for life assurance premiums, namely the expected cost of claims, an allowance for expenses, and a contingency margin as a reserve against the risk of insolvency. The dimensionality of the process describing security returns…

expand abstract