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Incomplete financial markets and contingent claim pricing in a dual expected utility theory framework

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  • Corradini, M.
  • Gheno, A.

Abstract

This paper investigates the price for contingent claims in a dual expected utility theory framework, the dual price, considering arbitrage-free financial markets. A pricing formula is obtained for contingent claims written on n underlying assets following a general diffusion process. The formula holds in both complete and incomplete markets as well as in constrained markets. An application is also considered assuming a geometric Brownian motion for the underlying assets and the Wang transform as the distortion function.

Suggested Citation

  • Corradini, M. & Gheno, A., 2009. "Incomplete financial markets and contingent claim pricing in a dual expected utility theory framework," Insurance: Mathematics and Economics, Elsevier, vol. 45(2), pages 180-187, October.
    • Handle: RePEc:eee:insuma:v:45:y:2009:i:2:p:180-187
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    References listed on IDEAS

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    More about this item

    Keywords

    Contingent claim pricing Dual expected utility theory Incomplete markets Wang transform;

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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