Arbitrage Pricing Systems in a Market Driven by an Itô Process

Shunlong Luo, Jia-an Yan and Qiang Zhang
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Shunlong Luo: Academy of Mathematics and System Sciences, Chinese Academy of Sciences, Beijing 100080, P. R. China
Jia-an Yan: Academy of Mathematics and System Sciences, Chinese Academy of Sciences, Beijing 100080, P. R. China
Qiang Zhang: Department of Economics and Finance, City University of Hong Kong, Kowloon, Hong Kong, P.R. China

Chapter 22 in Recent Developments in Mathematical Finance, 2001, pp 263-271 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractA pair of numeraire and equivalent martingale measure is called an arbitrage pricing system. In a security market driven by an Itô process, if we take the wealth process of an admissible self-financing strategy as a numeraire, then there is a natural family of equivalent martingale measures associated with market prices of risk. A subclass of arbitrage pricing systems is identified explicitly by a maximum entropy rationale in the spirit of Föllmer, Schweizer and Sondermann.

Keywords: Proceedings; Conference; Mathematical Finance; Shanghai (China) (search for similar items in EconPapers)
Date: 2001
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