The Valuation of Uncertain Income Streams and the Pricing of Options
Volume: Volume 7, No. 2
Issue: Autumn 1976
Pages: pp. 407-425
Authors: Mark Rubinstein
Title: The Valuation of Uncertain Income Streams and the Pricing of Options
Abstract: A simple formula is developed for the valuation of uncertain income streams consistent with rational risk averse investor behavior and equilibrium in financial markets. Applying this formula to the pricing of an option as a function of its associated stock, the Black-Scholes formula is derived even though investors can only trade at discrete points in time.
JEL Classification
Capital Markets Empirical Studies, Including Regulation (3132)
Business Finance (5210)