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Replicating portfolio in a binomial market
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Mathematical optimization
Mathematical finance
Discrete-time binomial market
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For one-period successor claim values
V
u
,
V
d
and stock prices
S
u
,
S
d
, the replicating stock holding is
Δ
=
S
u
−
S
d
V
u
−
V
d
.
(32)
The remaining value is placed in the risk-free asset. In a complete binomial market, backward replication determines the unique no-arbitrage claim price.
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Backward option pricing
Replicating portfolio in a binomial market
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Discrete-time binomial market
Mathematical finance
Mathematical optimization
Area of mathematics
Mathematics
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