Pricing in (In)Complete Markets Structural Analysis and Applications

In this book, the authors investigate structural aspects of no arbitrage pricing of contingent claims and applications of the general pricing theory in the context of incomplete markets. A quasi-closed form pricing equation in terms of artificial probabilities is derived for arbitrary payoff structu...

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Main Author: Esser, Angelika
Corporate Author: SpringerLink (Online service)
Format: eBook
Language:English
Published: Berlin, Heidelberg Springer Berlin Heidelberg 2004, 2004
Edition:1st ed. 2004
Series:Lecture Notes in Economics and Mathematical Systems
Subjects:
Online Access:
Collection: Springer Book Archives -2004 - Collection details see MPG.ReNa
Summary:In this book, the authors investigate structural aspects of no arbitrage pricing of contingent claims and applications of the general pricing theory in the context of incomplete markets. A quasi-closed form pricing equation in terms of artificial probabilities is derived for arbitrary payoff structures. Moreover, a comparison between continuous and discrete models is presented, highlighting the major similarities and key differences. As applications, two sources of market incompleteness are considered, namely stochastic volatility and stochastic liquidity. Firstly, the general theory discussed before is applied to the pricing of power options in a stochastic volatility model. Secondly, the issue of liquidity risk is considered by focusing on the aspect of how asset price dynamics are affected by the trading strategy of a large investor
Physical Description:XI, 122 p. 2 illus online resource
ISBN:9783642170652