Asset Pricing in an Imperfect World
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage property. We show that prices are coherent if and only if the set of pricing measures is non empty, i.e. if pricing by expectation is possible. We then obtain a decomposition of coherent prices highlighting the role of bubbles. Eventually we show that under very weak conditions the coherent pricing of options allows for a very clear representation which allows, as in Breeden and Litzenberger, to extract the implied probability.
Year of publication: |
2014-10
|
---|---|
Authors: | Cassese, Gianluca |
Institutions: | arXiv.org |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Option Pricing in an Imperfect World
Cassese, Gianluca, (2014)
-
Non Parametric Estimates of Option Prices Using Superhedging
Cassese, Gianluca, (2015)
-
Cassese, Gianluca, (2006)
- More ...