In this book, the authors investigate structural aspects of no arbitrage pricing of contingent claims and applications of the general pricing theory in the context of incomplete markets. A quasi-closed form pricing equation in terms of artificial probabilities is derived for arbitrary payoff structures. Moreover, a comparison between continuous and discrete models is presented, highlighting the major similarities and key differences. As applications, two sources of market incompleteness are considered, namely stochastic volatility and stochastic liquidity. Firstly, the general theory discussed before is applied to the pricing of power options in a stochastic volatility model. Secondly, the issue of liquidity risk is considered by focusing on the aspect of how asset price dynamics are affected by the trading strategy of a large investor.
| ISBN: | 9783540208174 |
| Publication date: | 23rd January 2004 |
| Author: | Angelika Esser |
| Publisher: | Springer an imprint of Springer Berlin Heidelberg |
| Format: | Paperback |
| Pagination: | 122 pages |
| Series: | Lecture Notes in Economics and Mathematical Systems |
| Genres: |
Microeconomics Stochastics Finance and the finance industry Probability and statistics Applied mathematics Economics, Finance, Business and Management |
In this book, the authors investigate structural aspects of no arbitrage pricing of contingent claims and applications of the general pricing theory in the context of incomplete markets. A quasi-closed form pricing equation in terms of artificial probabilities is derived for arbitrary payoff structures. Moreover, a comparison between continuous and discrete models is presented, highlighting the major similarities and key differences. As applications, two sources of market incompleteness are considered, namely stochastic volatility and stochastic liquidity. Firstly, the general theory discussed before is applied to the pricing of power options in a stochastic volatility model. Secondly, the issue of liquidity risk is considered by focusing on the aspect of how asset price dynamics are affected by the trading strategy of a large investor.
Pricing in (In)Complete Markets features in the following genres: Microeconomics, Stochastics, Finance and the finance industry, Probability and statistics, Applied mathematics, Economics, Finance, Business and Management
Pricing in (In)Complete Markets is available in Paperback
Pricing in (In)Complete Markets was written by Angelika Esser and published by Springer an imprint of Springer Berlin Heidelberg
Pricing in (In)Complete Markets has 122 pages
Yes it is part of Lecture Notes in Economics and Mathematical Systems series