Scenarios For Price Determination In Incomplete Markets
AbstractWe study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios, based on utility pricing. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing considerations. Dynamical schemes modeling the convergence of the buyer and seller prices to a unique price are proposed. The case of exponential utilities is treated in detail, in the simplest possible example of an incomplete market, the trinomial model.
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Bibliographic InfoArticle provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Theoretical and Applied Finance.
Volume (Year): 11 (2008)
Issue (Month): 05 ()
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Web page: http://www.worldscinet.com/ijtaf/ijtaf.shtml
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- Michail Anthropelos & Nikolaos E. Frangos & Stylianos Z. Xanthopoulos & Athanasios N. Yannacopoulos, 2008. "On contingent claims pricing in incomplete markets: A risk sharing approach," Science & Finance (CFM) working paper archive 0809.4781, Science & Finance, Capital Fund Management, revised Feb 2012.
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