The no-arbitrage pricing of non-traded assets

Robert Jarrow ()

Annals of Finance, 2023, vol. 19, issue 3, No 5, 418 pages

Abstract: Abstract This paper shows how to uniquely price non-traded assets using no-arbitrage in an otherwise frictionless market setting. The approach requires the assumption that the hedging error, properly defined, is non-priced or idiosyncratic risk. This methodology can be applied to private loans, illiquid publicly traded debt, insurance contacts, private equity, real estate, and real options.

Keywords: Arbitrage pricing; Non-traded assets; Idiosyncratic risk; Private debt; Private equity; Insurance contracts; Real estate; Real options (search for similar items in EconPapers)
JEL-codes: G12 G13 G22 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10436-023-00434-1

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