Pricing Without Martingale Measure

Computational Finance – The Martingale Measure and Pricing of Derivatives

At t = 0, two instruments are available. Any amount (even fractional) of either instrument may be sold or puschased at the specified market price i.e., arbitrary short or long positions are allowed. A risk free asset or bond, B, and a stock, S. At t = 0 (the first period), the bond is worth B(0), and, the stock is worth S(0) = 100. At t = T (the second period), the economy can be in one of two ...

Stock Futures Pricing Based on the Minimal Martingale Measure In Discrete-time Incomplete Markets

The increasing interest in financial innovation of enterprises has heightened the need for the knowledge of accurate pricing for derivatives in actual discrete-time incomplete market, especially for futures, the most actively traded derivatives in China. Nevertheless, even contingent claim pricing in such markets have few previous researches concentrated on, quite apart from futures. This paper...

Option Pricing with v. G. Martingale Components

Equivalence of the minimax martingale measure

This paper states that for financial markets with continuous filtrations, the minimax local martingale measure defined by Frittelli is equivalent to the objective measure for nondecreasing but not strictly increasing utility functions if it exists, provided the dual utility function satisfies some boundedness assumptions for the relative risk aversion, and there exists an equivalent local marti...

Concentration of measure without independence: a unified approach via the martingale method

The concentration of measure phenomenon may be summarized as follows: a function of many weakly dependent random variables that is not too sensitive to any of its individual arguments will tend to take values very close to its expectation. This phenomenon is most completely understood when the arguments are mutually independent random variables, and there exist several powerful complementary me...