Dynamic State Tameness
AbstractAn extension of the idea of state tameness is presented in a dynamic framework. The proposed model for financial markets is rich enough to provide analytical tools that are mostly obtained in models that arise as the solution of SDEs with deterministic coefficients. In the presented model the augmentation by a shadow stock of the price evolution has a Markovian character. As in a previous paper, the results obtained on valuation of European contingent claims and American contingent claims do not require the full range of the volatility matrix. Under some additional continuity conditions, the conceptual framework provided by the model makes it possible to regard the valuation of financial instruments of the European type as a particular case of valuation of instruments of American type. This provides a unifying framework for the problem of valuation of financial instruments.
Download InfoIf 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.
Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0509010.
Length: 19 pages
Date of creation: 08 Sep 2005
Date of revision: 20 Sep 2005
Note: Type of Document - pdf; pages: 19
Contact details of provider:
Web page: http://184.108.40.206
arbitrage; pricing of contingent claims; continuous-time financial markets; tameness; stochastic flows.;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
This paper has been announced in the following NEP Reports:
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.:
- Jaime A. Londo\~no, 2003. "State Tameness: A New Approach for Credit Constrains," Papers math/0305274, arXiv.org, revised Feb 2004.
- Jaime A. Londoño, 2003. "State Tameness: A New Approach for Credit Constrains," Finance 0305001, EconWPA, revised 16 Feb 2004.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.