On the martingale-fair index of return for investment funds

Leslaw Gajek and Marek Kaluszka

Papers from arXiv.org

Abstract: A concept of martingale-fair index of return, consistent with Arbitrage Free Pricing Theory, is introduced. An explicit formula for the average rate of return of a group of investment/pension funds in a discrete time stochastic model is derived and several properties of this index are shown. In particular, it is proven to be martingale-fair, i.e. be a martingale provided the prices of assets on the financial market form a vector martingale. The problem of merger of the funds is treated in detail.

Date: 2015-01
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1501.03768

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