Pricing and Hedging in Incomplete Markets

@inproceedings{Carr1999PricingAH,
  title={Pricing and Hedging in Incomplete Markets},
  author={Peter Carr},
  year={1999}
}
We present a new approach for positioning, pricing, and hedging in incomplete markets, which bridges standard arbitrage pricing and expected utility maximization. Our approach for determining whether to undertake a particular position involves specifying a set of probability measures and associated °oors which expected payo®s must exceed in order that the hedged and ̄nanced investment be acceptable. By assuming that the liquid assets are priced so that each portfolio of them has negative… CONTINUE READING
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