On the Information Content of Option Prices

It is well known that the market price of a standard option reflects the risk-neutral mean of its path-independent payoff. It is less well known that this same option price also reflects the risk-neutral mean of various path-dependent payoffs. We give several examples of such payoffs which together suggest that option prices convey much more information than one might initially expect.

Peter Carr, Bloomberg LP and Courant Institute, New York University

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