search query: @indexterm Financial theory / total: 142
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| Author: | Björk, T. Slinko, I. |
| Title: | Towards a general theory of good-deal bounds |
| Journal: | Review of finance
2006 : VOL. 10:2, p. 221-260 |
| Index terms: | asset valuation financial theory incomplete markets |
| Language: | eng |
| Abstract: | This study considers an incomplete market in the form of a multidimensional Markovian factor model, by a general marked point process (representing discrete jump events), as well as by a standard multidimensional Wiener process. Within this framework, this paper studies arbitrage-free good-deal pricing bounds for derivative assets, thereby extending the results by Cochrane and Saá Requejo, (2000) to the point process case, while, at the same time, obtaining a radical simplification of the theory. To illustrate, the paper presents numerical results for the classic Merton jump-diffusion model. As a by-product of the general theory, the study derives extended Hansen-Jagannathan bounds for the Sharpe Ratio process in the point process setting. |
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