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Numeraire Invariance and application to Option Pricing and Hedging

Jamshidian, Farshid (2008): Numeraire Invariance and application to Option Pricing and Hedging.

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Abstract

This is a short version of the paper of Exchange Options (2007), concentrating on the principle of numeraire invariance. It emphasizes application to unique pricing in arbitrage-free model, the derivation of hedge ratios and the PDE when price ratios are diffusions, explicit representations in the multivariate Poisson model, and the role played by homogeneity.

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