Pricing Without Martingale Measure
@article{Baptiste2018PricingWM, title={Pricing Without Martingale Measure}, author={Julien Baptiste and Laurence Carassus and Emmanuel L'epinette}, journal={Capital Markets: Asset Pricing \& Valuation eJournal}, year={2018} }
For several decades, the no-arbitrage (NA) condition and the martingale measures have played a major role in the financial asset's pricing theory. Here, we propose a new approach based on convex duality instead of martingale measures duality : our prices will be expressed using Fenchel conjugate and bi-conjugate. This is lead naturally to a weak condition of absence of arbitrage opportunity, called Absence of Immediate Profit (AIP), which asserts that the price of the zero claim should be zero…
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