Towards a general theory of good deal bounds

Arbeitspapier

We consider an incomplete market in the form of a multidimensional Markovian factor model, driven by a general marked point process (representing discrete jump events) as well as by a standard multidimensional Wiener process. Within this framework we study arbitrage free good deal pricing bounds for derivative assets along the lines of Cochrane and Saa-Requejo, extending the CSR results to the point process case. As a concrete application we present numerical results for the classic Merton jump-diffusion model. As a by product of the general theory we also extend the Hansen-Jagannathan bounds for the Sharpe Ratio to the point process setting.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SSE/EFI Working Paper Series in Economics and Finance ; No. 595

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Contingent Pricing; Futures Pricing; option pricing
• Subject: Incomplete markets ; good deal bounds ; financial derivatives ; arbitrage pricing ; Unvollkommener Markt ; Finanzderivat ; Optionspreistheorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Björk, Tomas ; Slinko, Irina
• Event: Veröffentlichung
• (who): Stockholm School of Economics, The Economic Research Institute (EFI)
• (where): Stockholm
• (when): 2005

Further information

• Handle: http://hdl.handle.net/10419/56185
• Last update: 10.03.2025, 11:45 AM CET