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Scenarios For Price Determination In Incomplete Markets

Author

Listed:
  • S. Z. XANTHOPOULOS

    (Department of Statistics and Actuarial-Financial Mathematics, University of the Aegean, Samos, Greece)

  • A. N. YANNACOPOULOS

    (Department of Statistics, Athens University of Economics and Business, Athens, Greece)

Abstract

We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios, based on utility pricing. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing considerations. Dynamical schemes modeling the convergence of the buyer and seller prices to a unique price are proposed. The case of exponential utilities is treated in detail, in the simplest possible example of an incomplete market, the trinomial model.

Suggested Citation

  • S. Z. Xanthopoulos & A. N. Yannacopoulos, 2008. "Scenarios For Price Determination In Incomplete Markets," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 11(05), pages 415-445.
    • Handle: RePEc:wsi:ijtafx:v:11:y:2008:i:05:n:s0219024908004877
    DOI: 10.1142/S0219024908004877
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    Citations

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    Cited by:

    1. Lampros Boukas & Diogo Pinheiro & Alberto Pinto & Stylianos Xanthopoulos & Athanasios Yannacopoulos, 2009. "Behavioural and Dynamical Scenarios for Contingent Claims Valuation in Incomplete Markets," Papers 0903.3657, arXiv.org.
    2. Balter, Anne G. & Pelsser, Antoon, 2020. "Pricing and hedging in incomplete markets with model uncertainty," European Journal of Operational Research, Elsevier, vol. 282(3), pages 911-925.
    3. Michail Anthropelos & Nikolaos E. Frangos & Stylianos Z. Xanthopoulos & Athanasios N. Yannacopoulos, 2008. "On contingent claims pricing in incomplete markets: A risk sharing approach," Papers 0809.4781, arXiv.org, revised Feb 2012.
    4. N. Azevedo & D. Pinheiro & S. Z. Xanthopoulos & A. N. Yannacopoulos, 2018. "Contingent claim pricing through a continuous time variational bargaining scheme," Annals of Operations Research, Springer, vol. 260(1), pages 95-112, January.

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