Chapter 2: FAQs 27
prices on a screen in front of you then you are likely to
find that when you try to take advantage of them they
just evaporate. Here are several reasons for this.
- Quoted prices are wrong or not tradeable
- Option and stock prices were not quoted
synchronously
- There is a bid-offer spread you have not accounted
for
- Your model is wrong, or there is a risk factor you
have not accounted for
References and Further Reading
Merton, RC 1973 Theory of rational option pricing.Bell Journal
of Economics and Management Science 4 141–83
Wilmott, P 2001Paul Wilmott Introduces Quantitative Finance.
John Wiley & Sons
