A Benchmark Model for Financial Markets
AbstractThis paper introduces a benchmark model for financial markets, which is based on the unique characterization of a benchmark portfolio that is chosen to be the growth optimal portfolio. The general structure of risk premia for asset prices as an average of appreciation rates. The benchmark model is shown to be locally arbitrage free, however, it still permits some form of arbitrage. Finally, a subclass of arbitrage free contingent claim prices is derived.
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Bibliographic InfoPaper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 59.
Date of creation: 01 Jun 2001
Date of revision:
financial market model; benchmark model; growth optimal portfolio; contingent claim pricing; arbitrage amount;
Other versions of this item:
- 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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"A Minimal Financial Market Model,"
Research Paper Series
48, Quantitative Finance Research Centre, University of Technology, Sydney.
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