Lecture Notes in Economics and Mathematical Systems

Pricing in (In)Complete Markets

Structural Analysis and Applications

Authors: Esser, Angelika

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About this book

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.

Table of contents (6 chapters)

  • Motivation and Overview

    Esser, Angelika

    Pages 1-7

  • Pricing by Change of Measure and Numeraire

    Esser, Angelika

    Pages 9-22

  • Comparison of Discrete and Continuous Models

    Esser, Angelika

    Pages 23-54

  • Valuation of Power Options

    Esser, Angelika

    Pages 55-67

  • Modeling Feedback Effects Using Stochastic Liquidity

    Esser, Angelika

    Pages 69-93

Buy this book

eBook $69.99
price for USA (gross)
  • ISBN 978-3-642-17065-2
  • Digitally watermarked, DRM-free
  • Included format: PDF
  • ebooks can be used on all reading devices
  • Immediate eBook download after purchase
Softcover $89.99
price for USA
  • ISBN 978-3-540-20817-4
  • Free shipping for individuals worldwide
  • Usually dispatched within 3 to 5 business days.
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Bibliographic Information

Bibliographic Information
Book Title
Pricing in (In)Complete Markets
Book Subtitle
Structural Analysis and Applications
Authors
Series Title
Lecture Notes in Economics and Mathematical Systems
Series Volume
537
Copyright
2004
Publisher
Springer-Verlag Berlin Heidelberg
Copyright Holder
Springer-Verlag Berlin Heidelberg
eBook ISBN
978-3-642-17065-2
DOI
10.1007/978-3-642-17065-2
Softcover ISBN
978-3-540-20817-4
Series ISSN
0075-8442
Edition Number
1
Number of Pages
XI, 122
Number of Illustrations and Tables
2 b/w illustrations
Topics