Pricing of Non-redundant Derivatives in a Complete Market
AbstractWe consider a complete financial market with primitive assets and derivatives on these primitive assets. Nevertheless, the derivative assets are non-redundant in the market, in the sense that the market is complete, only with their existence. In such a framawork, we derive an equilibrium restriction on the admissible prices of derivatives assets. The equilibrium condition imposes a well-ordering principle equivalent martingale measures. This restriction is preference free and applies whenever the utility functions belong to the general class of Von-Neumann Morgenstern functions. We provide numerical examples that show the applicability of restriction for the computation of option prices
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Bibliographic InfoPaper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00167151.
Date of creation: Dec 1998
Date of revision:
Publication status: Published, Review of Derivatives Research, 1998, 2, 4, 287-314
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Other versions of this item:
- Elyes Jouini & Pierre-Francois Koehl, . "Pricing of Non-redundant Derivatives in a Complete Market," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-009, New York University, Leonard N. Stern School of Business-.
- A, Bizid & Elyès Jouini & P, F, Koehl, 1997. "Pricing of Non-redundant Derivatives in a Complete Market," Working Papers 97-51, Centre de Recherche en Economie et Statistique.
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
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