Indifference valuation in incomplete binomial models∗
نویسندگان
چکیده
The indifference valuation problem in incomplete binomial models is analyzed. The model is general in that the stochastic factor which generates the marlet incompleteness may affect the transition propabilities and/or the values of the traded asset as well as the claim’s payoff. Two pricing algorithms are constructed which use, respectively, the minimal martingale and minimal entropy measures. The interplay among the different kinds of market incompleteness, the pricong measures and the price functionals is studied in detail. The dependence of the prices in the choice of the trading horizon is, also, discussed. Finally, the family of ”almost complete” models is studied. It is shown that the two measures and the price functionals coincide, and that the effects of the horizon choice dissipate.
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