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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| Length: | 18 pages |
| Date of creation: | 01 Sep 2000 |
| Date of revision: | |
| Handle: | RePEc:uts:rpaper:45 |
| Contact details of provider: | Postal: PO Box 123, Broadway, NSW 2007, Australia Phone: +61 2 9514 7777 Fax: +61 2 9514 7711 Web page: http://www.qfrc.uts.edu.au/ More information through EDIRC
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References listed on IDEAS
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- Eckhard Platen, 1999. "A Minimal Share Market Model with Stochastic Volatility," Research Paper Series 21, Quantitative Finance Research Centre, University of Technology, Sydney.
- N. Hofmann & E. Platen & M. Schweizer, 1992.
"Option Pricing under Incompleteness and Stochastic Volatility,"
Discussion Paper Serie B
209, University of Bonn, Germany.
- Norbert Hofmann & Eckhard Platen & Martin Schweizer, 1992. "Option Pricing Under Incompleteness and Stochastic Volatility," Mathematical Finance, Wiley Blackwell, vol. 2(3), pages 153-187.
- L. C. G. Rogers, 1997. "The Potential Approach to the Term Structure of Interest Rates and Foreign Exchange Rates," Mathematical Finance, Wiley Blackwell, vol. 7(2), pages 157-176.
- 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.
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