Asset price processes are completely described by information processes and investors´ preferences. In this paper we derive the relationship between the process of investors´ expectations of the terminal stock price and asset prices in a general continous time pricing kernel framework. To...

In this paper, we examine an exchange economy with a financial market composed of three assets: a share of a stock, an European call option written on the stock, and a riskless bond. The financial market is assumed to be incomplete and the option is not a redundant asset. In such a case the...

A market is described by two correlated asset prices. But only one of them is traded while the contingent claim is a function of both assets. We solve the mean-variance hedging prob- lem completely and prove that the optimal strategy consists of a modified pure hedge expressible in terms of the...