Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Discrete Time Benchmark Approach for Finance and Insurance

Contents:

Author Info

Abstract

This paper proposes an integrated appraoch to discrete time modelling in finance and insurance. This approach is based on the existence of a specific benchmark portfolio, known as the growth optimal portfolio. When used as numeraire, this portfolio ensures that all benchmarked price processes are super-martingales. A fair market is characterized in terms of the type of maximum that the optimal growth rate attains. In general, arbitrage amounts arise due to supermartingale property of benchmarked traded prices. No measure transformation is needed for the pricing of insurance policies and derivatives in a fair market.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.business.uts.edu.au/qfrc/research/research_papers/rp74.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 74.

as in new window
Length:
Date of creation: 01 Mar 2002
Date of revision:
Handle: RePEc:uts:rpaper:74

Contact details of provider:
Postal: PO Box 123, Broadway, NSW 2007, Australia
Phone: +61 2 9514 7777
Fax: +61 2 9514 7711
Web page: http://www.qfrc.uts.edu.au/
More information through EDIRC

Related research

Keywords: financial and insurance market model; benchmark approach; growth optimal portfolio; numeraire portfolio; arbitrage amount; fair pricing; unit linked insurance;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. L. C. G. Rogers, 1997. "The Potential Approach to the Term Structure of Interest Rates and Foreign Exchange Rates," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 157-176.
  2. Buhlmann, H., 1992. "Stochastic discounting," Insurance: Mathematics and Economics, Elsevier, vol. 11(2), pages 113-127, August.
  3. Constantinides, George M, 1992. "A Theory of the Nominal Term Structure of Interest Rates," Review of Financial Studies, Society for Financial Studies, vol. 5(4), pages 531-52.
  4. I. Bajeux-Besnainou & R. Portait, 1997. "The numeraire portfolio: a new perspective on financial theory," The European Journal of Finance, Taylor & Francis Journals, vol. 3(4), pages 291-309.
  5. Eckhard Platen, 2001. "A Minimal Financial Market Model," Research Paper Series 48, Quantitative Finance Research Centre, University of Technology, Sydney.
  6. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
  7. Long, John Jr., 1990. "The numeraire portfolio," Journal of Financial Economics, Elsevier, vol. 26(1), pages 29-69, July.
  8. Dirk Becherer, 2001. "The numeraire portfolio for unbounded semimartingales," Finance and Stochastics, Springer, vol. 5(3), pages 327-341.
  9. N. Hofmann & E. Platen & M. Schweizer, 1992. "Option Pricing under Incompleteness and Stochastic Volatility," Discussion Paper Serie B 209, University of Bonn, Germany.
  10. Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, vol. 11(3), pages 215-260, August.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Eckhard Platen & Renata Rendek, 2010. "Approximating the Numeraire Portfolio by Naive Diversification," Research Paper Series 281, Quantitative Finance Research Centre, University of Technology, Sydney.
  2. Eckhard Platen, 2003. "A Benchmark Framework for Risk Management," Research Paper Series 113, Quantitative Finance Research Centre, University of Technology, Sydney.
  3. Eckhard Platen & Jason West, 2003. "Fair Pricing of Weather Derivatives," Research Paper Series 106, Quantitative Finance Research Centre, University of Technology, Sydney.
  4. Kevin Fergusson & Eckhard Platen, 2013. "Real World Pricing of Long Term Cash-Linked Annuities and Equity-Linked Annuities with Cash-Linked Guarantees," Research Paper Series 338, Quantitative Finance Research Centre, University of Technology, Sydney.
  5. Eckhard Platen & Jason West, 2004. "A Fair Pricing Approach to Weather Derivatives," Asia-Pacific Financial Markets, Springer, vol. 11(1), pages 23-53, March.
  6. Morten Christensen & Eckhard Platen, 2004. "A General Benchmark Model for Stochastic Jump Sizes," Research Paper Series 139, Quantitative Finance Research Centre, University of Technology, Sydney.
  7. T. Marquardt & Eckhard Platen & S. Jaschke, 2008. "Valuing Guaranteed Minimum Death Benefit Options in Variable Annuities Under a Benchmark Approach," Research Paper Series 221, Quantitative Finance Research Centre, University of Technology, Sydney.
  8. David R. Banos & Giulia Di Nunno & Frank Proske, 2013. "Sensitivity analysis in a market with memory," Papers 1312.5116, arXiv.org.
  9. Eckhard Platen & Jason West & Wolfgang Breymann, 2004. "An Intraday Empirical Analysis of Electricity Price Behaviour," Research Paper Series 140, Quantitative Finance Research Centre, University of Technology, Sydney.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:uts:rpaper:74. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Duncan Ford).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.