Risk Premia and Financial Modelling Without Measure Transformation
This paper describes a financial market modelling framework that exploits the notion of a deflator. The demonstrations of the deflator measured in units of primary assets form a minimal set of basic financial quantities that completely specify overall market dynamics. Risk premia of asset prices are obtained as a natural consequence of the approach. Contingent claim prices are computed under the real world measure both in the case of complete and incomplete markets.
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- Norbert Hofmann & Eckhard Platen & Martin Schweizer, 1992.
"Option Pricing Under Incompleteness and Stochastic Volatility,"
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