This article presents a new option pricing principle that is more useful than the no-arbitrage principle, especially for incomplete markets. The focus here is on ideas behind mathematics— why the new theory is warranted, and how common sense dictates its construction. I. Complete and Incomplete Markets The real financial world is too complicated for anyone to understand it completely. Thus a si...

The fall of the Iron Curtain in 1989 sparked a wave of economic and political liberalization all over the world. Main beneficiaries of this development have been countries in Central and Eastern Europe and Asia, whose societies and markets have embarked on a reform path to a democratic society and market economy. Economies in Latin America and Africa have also been forced to reconsider their ec...

It is important to consider therefore the economic effects of these links among national capital markets, including the effects on investment, growth, monetary policy, and exchange rates. In their paper for this conference, Michael Mussa and Morris Goldstein have combined a wide-ranging summary of the existing research on the integration of world capital markets with their own carefully conside...