Name
Title | ||
|---|---|---|
An approximation pricing algorithm in an incomplete market: A differential geometric approach |
Abstract | ||
|---|---|---|
The minimal distance equivalent martingale measure (EMM) defined in Goll and Rüschendorf (2001) is the arbitrage-free equilibrium pricing measure. This paper provides an algorithm to approximate its density and the fair price of any contingent claim in an incomplete market. We first approximate the infinite dimensional space of all EMMs by a finite dimensional manifold of EMMs. A Riemannian geometric structure is shown on the manifold. An optimization algorithm on the Riemannian manifold becomes the approximation pricing algorithm. The financial interpretation of the geometry is also given in terms of pricing model risk. |
Year | DOI | Venue |
|---|---|---|
2004 | 10.1007/s00780-004-0128-5 | Finance and Stochastics |
Keywords | Field | DocType |
riemannian manifold,incomplete markets,asset pricing,cross en- tropy,incomplete market,cross entropy | Cross entropy,Mathematical optimization,Financial economics,Martingale (probability theory),Riemannian manifold,Capital asset pricing model,Algorithm,Model risk,Risk-neutral measure,Incomplete markets,Manifold,Mathematics | Journal |
Volume | Issue | ISSN |
8 | 4 | 0949-2984 |
Citations | PageRank | References |
0 | 0.34 | 6 |
Authors | ||
3 | ||
Name | Order | Citations | PageRank |
|---|---|---|---|
| Yuan Gao | 1 | 0 | 0.34 |
| Kian Guan Lim | 2 | 60 | 5.35 |
| Kah Hwa Ng | 3 | 0 | 0.34 |