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2004-05-21Buch DOI: 10.18452/8321
Arbitrage pricing of American contingent claims in incomplete markets - a convex optimization approach
dc.contributor.authorPennanen, Teemu
dc.contributor.authorKing, Alan J.
dc.contributor.editorHigle, Julie L.
dc.contributor.editorRömisch, Werner
dc.contributor.editorSen, Surrajeet
dc.date.accessioned2017-06-16T19:59:12Z
dc.date.available2017-06-16T19:59:12Z
dc.date.created2006-03-02
dc.date.issued2004-05-21
dc.date.submitted2004-02-19
dc.identifier.urihttp://edoc.hu-berlin.de/18452/8973
dc.description.abstractConvex 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.eng
dc.language.isoeng
dc.publisherHumboldt-Universität zu Berlin, Mathematisch-Naturwissenschaftliche Fakultät II, Institut für Mathematik
dc.subject.ddc510 Mathematik
dc.titleArbitrage pricing of American contingent claims in incomplete markets - a convex optimization approach
dc.typebook
dc.identifier.urnurn:nbn:de:kobv:11-10059538
dc.identifier.doihttp://dx.doi.org/10.18452/8321
local.edoc.container-titleStochastic Programming E-Print Series
local.edoc.pages11
local.edoc.type-nameBuch
local.edoc.container-typeseries
local.edoc.container-type-nameSchriftenreihe
local.edoc.container-volume2004
local.edoc.container-issue14
local.edoc.container-erstkatid2936317-2

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