| Author: | Bernardo, A. Ledoit, O. |
| Title: | Gain, loss, and asset pricing |
| Journal: | Journal of Political Economy
2000 : FEB, VOL. 108:1, p. 144-172 |
| Index terms: | POLITICAL ECONOMY LOSS ASSETS |
| Language: | eng |
| Abstract: | The authors develop an approach to asset pricing in incomplete markets that bridges the gap between the two fundamental approaches in finance: model-based pricing and pricing by no arbitrage. The authors strengthen the absence of arbitrage assumption by precluding investment opportunities whose attractiveness to a benchmark investor exceeds a specified threshold. In the authors' framework, the attractiveness of an investment opportunity is measured by the gain-loss ratio. |
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