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Different measurement unit, same finance model

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  • Makarov, Dmitry

Abstract

Changing the measurement unit of a quantity in an existing finance model and re-expressing the results accordingly does not yield a new model with novel economic properties or implications. We reexamine the pricing models developed in Carr and Wu (2020) and Carr and Wu (2023), which are presented as new frameworks. In contrast, we show that these models are fundamentally equivalent to an existing framework in terms of the underlying mechanisms and pricing implications, differing only in how they measure asset value. We outline several undesirable consequences for academics and practitioners that may arise if the equivalence is overlooked.

Suggested Citation

  • Makarov, Dmitry, 2025. "Different measurement unit, same finance model," Finance Research Letters, Elsevier, vol. 86(PC).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pc:s1544612325017866
    DOI: 10.1016/j.frl.2025.108532
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