A Benchmark Model for Financial Markets
This paper introduces a benchmark model for financial markets, which is based on the unique characterization of a benchmark portfolio that is chosen to be the growth optimal portfolio. The general structure of risk premia for asset prices as an average of appreciation rates. The benchmark model is shown to be locally arbitrage free, however, it still permits some form of arbitrage. Finally, a subclass of arbitrage free contingent claim prices is derived.
|Date of creation:||01 Jun 2001|
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SFB 373 Discussion Papers
2000,91, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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