|edoc-Server der Humboldt-Universität zu Berlin|
Teemu Pennanen, Helsinki School of Economics|
Alan J. King, IBM Watson Research Center
|Title:||Arbitrage pricing of American contingent claims in incomplete markets - a convex optimization approach|
|Date of Acceptance:||21.05.2004|
Stochastic Programming E-Print Series |
|Editors:||Julie L. Higle; Werner Römisch; Surrajeet Sen|
|Complete Preprint:||pdf (urn:nbn:de:kobv:11-10059538)|
|Metadata export: To export the complete metadata set as Endote or Bibtex format please click to the appropriate link.||Endnote Bibtex|
|print on demand: If you click on this icon you can order a print copy of this publication.|
|Convex optimization provides a natural framework for pricing and hedging financial instruments in incomplete market models. Duality theory of convex optimization has been shown to yield elementary proofs of well-known martingale-expressions for prices of European contingent claims. This paper extends the analysis to American contingent claims in incomplete markets. The pricing problems of the seller and the buyer of an American contingent claim are first expressed as convex optimization problems, after which martingale-expressions for the buyer's and seller's prices are obtained by inspecting the dual optimization problems. Besides its simplicity, one of the main advantages of the present approach is that it is computational. Indeed, many algorithms are available for pricing problems as soon as they are set up as convex optimization problems. Also, portfolio constraints and transaction costs can be immediately incorporated to the definitions of the buyer's and seller's prices and into computational approaches based on optimization.|
These data concerning access statistics for individual documents
have been compiled using the webserver log files aggregated by AWSTATS.
They refer to a monthly access count to the full text documents as well as to the entry page.
As for format versions of a document which consist of multiple files (such as HTML) the highest monthly access number to one of the files (chapters) is shown respectivly.
To see the detailled access numbers please move the mouse pointer over the single bars of the digaram.
Gesamtzahl der Zugriffe seit Jul 2011: