Towards a General Theory of Good Deal Bounds

Tomas Bjork and Irina Slinko ()
Additional contact information
Irina Slinko: Dept. of Finance, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

No 595, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: We consider an incomplete market in the form of a multidimensional Markovian factor model, driven by a general marked point process (representing discrete jump events) as well as by a standard multidimensional Wiener process. Within this framework we study arbitrage free good deal pricing bounds for derivative assets along the lines of Cochrane and Saa-Requejo, extending the CSR results to the point process case.

As a concrete application we present numerical results for the classic Merton jump-diffusion model. As a by product of the general theory we also extend the Hansen-Jagannathan bounds for the Sharpe Ratio to the point process setting.

Keywords: Incomplete markets; good deal bounds; financial derivatives; arbitrage pricing (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2004-02-03
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://swopec.hhs.se/hastef/papers/hastef0595.pdf (application/pdf)

Related works:
Journal Article: Towards a General Theory of Good-Deal Bounds (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0595

Access Statistics for this paper

More papers in SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by Helena Lundin ().