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GOOD DEAL BOUNDS WITH CONVEX CONSTRAINTS

Takuji Arai ()
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Takuji Arai: Department of Economics, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 108-8345, Japan

International Journal of Theoretical and Applied Finance (IJTAF), 2017, vol. 20, issue 02, 1-15

Abstract: We investigate the structure of good deal bounds, which are subintervals of a no-arbitrage pricing bound, for financial market models with convex constraints as an extension of Arai & Fukasawa (2014). The upper and lower bounds of a good deal bound are naturally described by a convex risk measure. We call such a risk measure a good deal valuation; and study its properties. We also discuss superhedging cost and Fundamental Theorem of Asset Pricing for convex constrained markets.

Keywords: Convex risk measure; good deal bound; convex constraints; superhedging cost; fundamental theorem of asset pricing (search for similar items in EconPapers)
Date: 2017
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