3 ms·
black-scholes also assumes the ability to dynamically, instantaneously hedge with very low transaction costs I recall. The market-maker has to charge even more
by hasker 13y ago
black-scholes also assumes the ability to dynamically, instantaneously hedge with very low transaction costs I recall. The market-maker has to charge even more to recover costs in this case since they cannot dynamically hedge and bid-offer tight nor is the market deep.