The paper focuses on the problem of pricing and hedging a European contingent claim for an incomplete market model, in which evolution of price processes for a saving account and stocks depends on an observable Markov chain. The pricing function is evaluated using the martingale approach. The...

From the early-1950s on, F.A. Hayek was concerned with the development of a methodology of sciences that study systems of complex phenomena. Hayek argued that the knowledge that can be acquired about such systems is, in virtue of their complexity (and the comparatively narrow boundaries of human...