The paper generalizes and refines the Fundamental Theorem of Asset Pricing of Dalang, Morton and Willinger in the …

In order to analyze the pricing of portfolio credit risk – as revealed by tranche spreads of a popular credit default …

pricing models reflect these risks. Averaging across the pool of investors we obtain a market asset pricing model that … investors, that many personally relevant risk considerations can be eliminated from the market asset pricing model. Examples … on asset pricing include a need to focus on identifying and explaining investor specific risk exposures. …

return series, and under the risk neutral measure from option prices. The difference between the two estimates motivates a so … with the size of the basket. Second, since the IC is implied from option prices it is not constant over maturities and …

Taking a portfolio perspective on option pricing and hedging, we show that within the standard Black … indefinitely. This ties the literature on option pricing and hedging closer together with the APT literature in its focus on …) hedging the total risk of each option separately, the correct hedge portfolio in discrete time eliminates linear (delta) as …