Pricing and valuation under the real-world measure (Q2797876)
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scientific article; zbMATH DE number 6561970
| Language | Label | Description | Also known as |
|---|---|---|---|
| English | Pricing and valuation under the real-world measure |
scientific article; zbMATH DE number 6561970 |
Statements
1 April 2016
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arbitrage
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complete market
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complex market
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efficient market
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enlargement of filtrations
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fundamental theorem of asset pricing
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growth-optimal portfolio
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immersion
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numéraire portfolio
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pricing
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sensitive market
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valuation
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0.86876756
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0.85439295
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0.85362536
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Pricing and valuation under the real-world measure (English)
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In order to surmount the difficulties encountered in econometric applications implicit in the role played by the risk-neutral measure in pricing assets, this paper provides conditions under which the appropriately discounted price process is a uniformly integrable martingale under the real-world measure. Completeness is defined as the existence of a unique equivalent probability measure transforming discounted prices into uniformly integrable martingales. The other key assumption is that every local martingale on the filtration generated by prices is a local martingale on the general filtration.
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