A general problem of an optimal equivalent change of measure and contingent claim pricing in an incomplete market
A general model of an optimal equivalent change of measure is considered. Existence and uniqueness conditions of a solution of backward semimartingale equation for the value process are given. This result is applied to determine the maximum price of a contingent claim.
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Volume (Year): 90 (2000)
Issue (Month): 1 (November)
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- 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.
- Kramkov, D.O., 1994. "Optional decomposition of supermartingales and hedging contingent claims in incomplete security markets," Discussion Paper Serie B 294, University of Bonn, Germany.
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