The numeraire portfolio for unbounded semimartingales
AbstractAsset prices discounted by a tradable numeraire N should be (local) martingales under some measure Q that is equivalent to the original probability measure P. Instead of studying the set of equivalent martingale measures with respect to a prespecified numeraire, we will look for a tradable numeraire $N^P$ such that the discounted asset prices become martingales with respect to the original measure P. $N^P$ is called (P-)numeraire portfolio. Since the above martingale condition is too stringent to obtain a general existence result, we define a (generalized) numeraire portfolio by a weaker requirement. This $N^P$ is characterized as the solution to several optimization problems.
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Bibliographic InfoArticle provided by Springer in its journal Finance and Stochastics.
Volume (Year): 5 (2001)
Issue (Month): 3 ()
Note: received: March 1999; final version received: July 2000
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Web page: http://www.springerlink.com/content/101164/
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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