Incomplete financial markets and contingent claim pricing in a dual expected utility theory framework |
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Authors: | M Corradini A Gheno |
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Institution: | aUniversity of Rome III, Department of Economics, via Silvio d’Amico 77, 00145 Roma, Italy |
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Abstract: | This paper investigates the price for contingent claims in a dual expected utility theory framework, the dual price, considering arbitrage-free financial markets. A pricing formula is obtained for contingent claims written on n underlying assets following a general diffusion process. The formula holds in both complete and incomplete markets as well as in constrained markets. An application is also considered assuming a geometric Brownian motion for the underlying assets and the Wang transform as the distortion function. |
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Keywords: | Contingent claim pricing Dual expected utility theory Incomplete markets Wang transform |
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