Binomial financial market in the context of the algebra of stochastic exponents and martingales (Q2737030)
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scientific article; zbMATH DE number 1645099
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | Binomial financial market in the context of the algebra of stochastic exponents and martingales |
scientific article; zbMATH DE number 1645099 |
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11 September 2001
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binomial financial market
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stochastic exponents
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martingales
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Cox-Ross-Rubinstein formula
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utility function
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Binomial financial market in the context of the algebra of stochastic exponents and martingales (English)
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It is well-known, that applying the martingale technique and algebra of stochastic exponents is a useful instrument of study the most important problems in finance, such as hedging and investment. NEWLINENEWLINENEWLINEIn this paper, the classical binomial market is considered to revise the well-known Cox-Ross-Rubinstein (CRR) model of a financial market. NEWLINENEWLINENEWLINEUsing martingale technique and algebra of stochastic exponents, the author presents a simplified proof of the classical CRR formula. NEWLINENEWLINENEWLINEAn optimal strategy of maximization of the expected logarithmic utility is also obtained.
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