Benchmark-Neutral Pricing
Fuente:
arXiv
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| Autore principale: | |
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| Natura: | Preprint |
| Pubblicazione: |
2024
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| Soggetti: | |
| Accesso online: | |
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| _version_ | 1866909238013460480 |
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| author | Platen, Eckhard |
| author_facet | Platen, Eckhard |
| contents | The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic parsimonious model, this pricing measure turns out to be an equivalent probability measure, which is not the case for the risk-neutral pricing measure. Many risk-neutral prices of long-term contracts are more expensive than necessary. Benchmark-neutral pricing identifies the minimal possible prices of contingent claims, which is illustrated with remarkable accuracy for a long-term zero-coupon bond. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2407_01542 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Benchmark-Neutral Pricing Platen, Eckhard Mathematical Finance The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic parsimonious model, this pricing measure turns out to be an equivalent probability measure, which is not the case for the risk-neutral pricing measure. Many risk-neutral prices of long-term contracts are more expensive than necessary. Benchmark-neutral pricing identifies the minimal possible prices of contingent claims, which is illustrated with remarkable accuracy for a long-term zero-coupon bond. |
| title | Benchmark-Neutral Pricing |
| topic | Mathematical Finance |
| url | https://arxiv.org/abs/2407.01542 |