This article presents a new definition of market completeness that is independent of the notions of no arbitrage and equivalent martingale measures. Our definition has many advantages, all shown herein. First, it preserves the Second Fundamental Theorem of Asset Pricing, even in complex...

This article provides a Markov model for the term structure of credit risk spreads. The model is based on Jarrow and Turnbull (1995), with the bankruptcy process following a discrete state space Markov chain in credit ratings. The parameters of this process are easily estimated using observable...

The downside risk in a leveraged stock position can be eliminated by using stop-loss orders. The upside potential of such a position can be captured using contingent buy orders. The terminal payoff to this stop-loss start-gain strategy is identical to that of a call option, but the strategy...