@inbook{db626d1790334accb4a5b9dc5988866a,
title = "The Continuous Hedging Argument",
abstract = "This chapter develops a continuous hedging argument for derivative security pricing. Following fairly closely the original Black and Scholes (1973) article, we make use of Ito{\textquoteright}s lemma to derive the expression for the option value and exploit the idea of creating a hedged position by going long in one security, say the stock, and short in the other security, the option. Alternative hedging portfolios based on Merton{\textquoteright}s approach and self financing strategy approach are also introduced.",
keywords = "Capital Asset Price Model, Excess Return, Option Price, Risk Free Rate, Stochastic Differential Equation",
author = "Carl Chiarella and He, {Xue Zhong} and Nikitopoulos, {Christina Sklibosios}",
note = "Publisher Copyright: {\textcopyright} 2015, Springer-Verlag Berlin Heidelberg.",
year = "2015",
doi = "10.1007/978-3-662-45906-5_7",
language = "English",
series = "Dynamic Modeling and Econometrics in Economics and Finance",
publisher = "Springer Science and Business Media Deutschland GmbH",
pages = "145--156",
booktitle = "Dynamic Modeling and Econometrics in Economics and Finance",
}