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Contingent Claim Pricing In A Dual Expected Utility Theory Framework

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Author Info
Massimiliano Corradini
Andrea Gheno
Abstract

This paper investigates the price for contingent claims in a dual expected utility theory framework, the dual price, considering complete arbitrage-free nancial markets. In this framework this dual price is obtained, for the rst time in the literature, without any comonotonicity hypothesis and for contingent claims written on n underlying assets following generic Itô processes. An application is also considered assuming geometric brownian motion for the underlying assets and the Wang transform as distortion function.

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Paper provided by Department of Economics - University Roma Tre in its series Departmental Working Papers of Economics - University 'Roma Tre' with number 0082.

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Length: 16
Date of creation: Dec 2007
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Handle: RePEc:rtr:wpaper:0082

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Related research
Keywords: Contingent Claims Pricing; Dual Utility Theory; Wang Transform.;

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  1. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January. [Downloadable!] (restricted)
  2. Mahmoud Hamada & Michael Sherris, 2003. "Contingent claim pricing using probability distortion operators: methods from insurance risk pricing and their relationship to financial theory," Applied Mathematical Finance, Taylor and Francis Journals, vol. 10(1), pages 19-47, January. [Downloadable!] (restricted)
  3. Robert C. Merton, 1973. "Theory of Rational Option Pricing," Bell Journal of Economics, The RAND Corporation, vol. 4(1), pages 141-183, Spring. [Downloadable!] (restricted)
  4. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June. [Downloadable!] (restricted)
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This page was last updated on 2009-12-17.

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