Choquet Pricing For Financial Markets With Frictions
AbstractIn markets where dealers play a central role, bid-ask spreads inhibit asset valuation as defined by the formation cost of a replicating portfolio. We introduce a nonlinear valuation formula similar to the usual expectation with respect to the risk-adjusted probability measure. This formula expresses the asset's selling and buying prices set by dealers as the Choquet integrals of their random payoffs We investigate several price puzzles: the violation of the put-call parity and the fact that the components of a security can sell at a premium to the underlying security (primes and scores). Copyright 1996 Blackwell Publishers.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Mathematical Finance.
Volume (Year): 6 (1996)
Issue (Month): 3 ()
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0960-1627
Other versions of this item:
- Chateauneuf, A. & Kast, R. & Lapied, A., 1992. "Choquet Pricing for Financial Markets with Frictions," G.R.E.Q.A.M. 92a11, Universite Aix-Marseille III.
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