A Benchmark Model for Financial Markets

Eckhard Platen ()

No 59, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: This paper introduces a benchmark model for financial markets, which is based on the unique characterization of a benchmark portfolio that is chosen to be the growth optimal portfolio. The general structure of risk premia for asset prices as an average of appreciation rates. The benchmark model is shown to be locally arbitrage free, however, it still permits some form of arbitrage. Finally, a subclass of arbitrage free contingent claim prices is derived.

Keywords: financial market model; benchmark model; growth optimal portfolio; contingent claim pricing; arbitrage amount (search for similar items in EconPapers)
JEL-codes: G10 G13 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2001-06-01
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Citations: View citations in EconPapers (2)

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Working Paper: A benchmark model for financial markets (2001)
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