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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26845
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| Title: | Pricing of Non-redundant Derivatives in a Complete Market |
| Authors: | Bizid, Abdelhamid
Jouini, Elyes
Koehl, Pierre-Francois |
| Issue Date: | 25-Feb-1999 |
| Series/Report no.: | FIN-99-009 |
| Abstract: | We consider a complete financial market with primitive assets and
derivatives on these primitive assets. Nevertheless, the derivative as
sets are non-redundant in the market, in the sense that the market is
complete, only with their existence. In such a framework, we derive an
equilibrium restriction on the admissible prices of derivative assets.
The equilibrium condition imposes a well-ordering principle restricting
the set of probability measures that qualify as candidate equivalent
martingale measures. This restriction is preference free and applies
whenever the utility functions belong to the general class of Von-Neuman
Morgenstern functions. We provide numerical examples that show the
applicability of the restriction for the computation of option prices. |
| URI: | http://hdl.handle.net/2451/26845 |
| Appears in Collections: | Finance Working Papers
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