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Pricing in (In)Complete Markets : Structural Analysis and Applications - Angelika Esser

Pricing in (In)Complete Markets

Structural Analysis and Applications

Paperback

Published: 23rd January 2004
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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.

Motivation and Overviewp. 1
Pricing by Change of Measure and Numerairep. 9
Comparison of Discrete and Continuous Modelsp. 23
Valuation of Power Optionsp. 55
Modeling Feedback Effects Using Stochastic Liquidityp. 69
Summary and Outlookp. 95
Power Options in Stochastic Volatility Modelsp. 97
Referencesp. 105
Abbreviationsp. 109
List of Symbolsp. 111
List of Figuresp. 117
List of Tablesp. 119
Indexp. 121
Table of Contents provided by Blackwell. All Rights Reserved.

ISBN: 9783540208174
ISBN-10: 3540208178
Series: Lecture Notes in Economic and Mathematical Systems
Audience: General
Format: Paperback
Language: English
Number Of Pages: 122
Published: 23rd January 2004
Publisher: Springer-Verlag Berlin and Heidelberg Gmbh & Co. Kg
Country of Publication: DE
Dimensions (cm): 23.39 x 15.6  x 0.76
Weight (kg): 0.2