Risk premia and financial modelling without measure transformation

Eckhard Platen ()

No 2000,92, SFB 373 Discussion Papers from Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes

Abstract: This paper describes a financial market modelling framework that exploits the notion of a deflator . The denominations of the deflator measured in units of primary assets form a minimal set of basic financial quantities that completely specify the overall market dynamics, where deflated asset prices appear as martingales. A specific form for the risk premia is obtained as a natural consequence of the approach. Contingent claim prices are computed under the real world measure both in the case of complete and incomplete markets avoiding the use of an equivalent risk neutral measure transformation.

Keywords: financial market modelling; deflator; risk premium; contingent claim pricing; incomplete market (search for similar items in EconPapers)
JEL-codes: G10 G13 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (2)

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Working Paper: Risk Premia and Financial Modelling Without Measure Transformation (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb373:200092

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