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Generalized Option Betas
Department of Business Administration, European University Viadrina, Frankfurt, Germany
Griffith Business School, Griffith University, Nathan, Australia
- 1 Department of Business Administration, European University Viadrina, Frankfurt, Germany
- 2 Griffith Business School, Griffith University, Nathan, Australia
Journal of Mathematical Finance·Volume 03 (2013)·Pages 347–356·Published 8 August 2013·DOI10.4236/jmf.2013.33035
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Abstract
This paper extends the option betas presented by Cox and Rubinstein (1985) and Branger and Schlag (2007). In par ticular, we show how the beta of the underlying asset affects both an option’s covariance beta and its asset pricing beta. In contrast to Branger and Schlag (2007), the generalized option betas coincide if the options are evaluated according to the CAPM option pricing model of Husmann and Todorova (2011). The option betas are presented in terms of Black - Scholes option prices and are therefore easy to use in practice.
KeywordsOption PricingBetaCapital Asset Pricing Model
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