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Dynamic Securities Market Model

In: Mathematical Financial Economics

Author

Listed:
  • Igor V. Evstigneev

    (University of Manchester)

  • Thorsten Hens

    (University of Zurich)

  • Klaus Reiner Schenk-Hoppé

    (University of Manchester)

Abstract

The chapter introduces the multi-period dynamic securities market model, an extension of the two-period model, which served as the main framework in Part I of the book. It states a multi-period version of the no-arbitrage hypothesis and discusses the concepts of market scenarios (histories), contingent portfolios, trading strategies, self-financing trading strategies, contingent claims and derivative securities. It presents one of the highlights of Mathematical Finance: the no-arbitrage pricing principle for contingent claims. The chapter concludes with defining the net present value (NPV) of a trading strategy and establishing an equivalent version of the no-arbitrage hypothesis stated in terms of the NPV.

Suggested Citation

  • Igor V. Evstigneev & Thorsten Hens & Klaus Reiner Schenk-Hoppé, 2015. "Dynamic Securities Market Model," Springer Texts in Business and Economics, in: Mathematical Financial Economics, edition 127, chapter 11, pages 105-114, Springer.
    • Handle: RePEc:spr:sptchp:978-3-319-16571-4_11
    DOI: 10.1007/978-3-319-16571-4_11
    as

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