Expectation and Price in Incomplete Markets

Autor:	McCloud, Paul
Rok vydání:	2020
Předmět:	Quantitative Finance - Mathematical Finance Quantitative Finance - Pricing of Securities
Druh dokumentu:	Working Paper
Popis:	Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price measure from the economic measure, subject to mark-to-market constraints, following arguments based on the optimisation of portfolio risk. The approach accounts for market and funding convexities and incorporates available price information, interpolating between methodologies based on expectation and replication. Comment: 31 pages, 6 figures
Databáze:	arXiv
Externí odkaz:	http://arxiv.org/abs/2006.16703 Zobrazit plný text záznamu View this record from Arxiv