FINANCIAL MARKETS WITH NO RISKLESS (SAFE) ASSET

Svetlozar T. Rachev (), Stoyan V. Stoyanov () and Frank Fabozzi ()
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Svetlozar T. Rachev: Department of Mathematics and Statistics, Texas Tech University, Lubbock, TX 79409, USA
Stoyan V. Stoyanov: College of Business, Stony Brook University, Stony Brook, NY 11794, USA

International Journal of Theoretical and Applied Finance (IJTAF), 2017, vol. 20, issue 08, 1-24

Abstract: We study markets with no riskless (safe) asset. We derive the corresponding Black–Scholes–Merton option pricing equations for markets where there are only risky assets which have the following price dynamics: (i) continuous diffusions; (ii) jump-diffusions; (iii) diffusions with stochastic volatilities, and; (iv) geometric fractional Brownian and Rosenblatt motions. No-arbitrage and market-completeness conditions are derived in all four cases.

Keywords: Riskless asset; Black–Scholes model; jump-diffusion model; stochastic volatility model; fractional Brownian motion (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (7)

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Working Paper: Financial market with no riskless (safe) asset (2016)
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DOI: 10.1142/S0219024917500546

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