Pricing Derived Securities Under an Edgeworthian Process
AbstractThe purpose of this paper is twofold. First, it introduces a new version of the Edgeworth process with trading activities centered around self- interested enterprising arbitragers; and second, it examines how the prices of the derived securities are determined under this process. We show that the proposed process is stable and the resulting equilibria are Pareto optimal. Pareto optimality notwithstanding, this process has the tendency to distribute the welfare gains resulting from the introduction of derived securities in favor of the arbitragers.
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 Microeconomics with number 9603001.
Length: 39 pages
Date of creation: 01 Mar 1996
Date of revision:
Note: Zipped using PKZIP v2.04, encoded using UUENCODE v5.15. Zipped file includes 1 file -- handbook (body in WP5.1, 39 pages)
Contact details of provider:
Web page: http://184.108.40.206
Find related papers by JEL classification:
- D1 - Microeconomics - - Household Behavior
- D2 - Microeconomics - - Production and Organizations
- D3 - Microeconomics - - Distribution
- D4 - Microeconomics - - Market Structure and Pricing
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.:
- Ross, Stephen A, 1976. "Options and Efficiency," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 75-89, February.
- 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.
- John, Kose, 1984. "Market Resolution and Valuation in Incomplete Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(01), pages 29-44, March.
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.