Template-Type:ReDIF-Paper 1.0  
Title:Convergence of Option Values under Incompleteness
Author-Name: Runggaldier, Wolfgang J.
Author-Name: Martin Schweizer
Classification-JEL:G13
Keywords:option pricing, incomplete markets, convergence, minimal martingale measure, locally risk-minimization
	trading strategies, jump-diffusion
Abstract: We study the problem of convergence of discrete-time option values to continuous-time option values.
	While previous papers typically concentrate on the approximation of geometric Brownian motion by a binomial tree,
	we consider here the case where the model is incomplete in both continuos and discrete time. Option values are defined
	with respect to the criterion of local risk-minimization and thus computed as expectations under the respective
	minimal martingale measures. We prove that for a jump-diffusion model with deterministic coefficients, these values
	converge; this shows that local risk-minimization processes an inherent stability property under discretization.
Length: pages
Creation-Date: 1995
Revision-Date: 
Handle: RePEc:bon:bonsfb:333