On the expected payoff and true probability of exercise of European options

Authors
Shackleton, M Wojakowski, R
Citation
M. Shackleton et R. Wojakowski, On the expected payoff and true probability of exercise of European options, APPL ECON L, 8(4), 2001, pp. 269-271
Citations number
9
Categorie Soggetti
Economics
Journal title
APPLIED ECONOMICS LETTERS
ISSN journal
13504851 → ACNP
Volume
8
Issue
4
Year of publication
2001
Pages
269 - 271
Database
ISI
SICI code
1350-4851(200104)8:4<269:OTEPAT>2.0.ZU;2-V
Abstract
The continuous-time formula for expected payoff to holding an option, which nests several major pricing tools, is derived. It is shown also that under current market conditions the true exercise probability, N(d(4)), lies hal fway between the two more familiar terms: N(d(1)) and N(d(2)).