Norberg, Ragnar (2003) The Markov chain market. Astin Bulletin, 33 (2). pp. 265-287. ISSN 0515-0361
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Identification Number: 10.2143/AST.33.2.503693
Abstract
We consider a financial market driven by a continuous time homogeneous Markov chain. Conditions for absence of arbitrage and for completeness are spelled out, non-arbitrage pricing of derivatives is discussed, and details are worked out for some cases. Closed form expressions are obtained for interest rate derivatives. Computations typically amount to solving a set of first order partial differential equations. An excursion into risk minimization in the incomplete case illustrates the matrix techniques that are instrumental in the model.
| Item Type: | Article |
|---|---|
| Official URL: | http://poj.peeters-leuven.be/content.php?url=journ... |
| Additional Information: | © 2003 Peeters |
| Divisions: | Statistics |
| Subjects: | H Social Sciences > HG Finance Q Science > QA Mathematics |
| Date Deposited: | 10 Jul 2008 13:43 |
| Last Modified: | 13 Sep 2024 21:37 |
| URI: | http://eprints.lse.ac.uk/id/eprint/13137 |
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