Convex pricing by a generalized entropy penalty
Pricing of Securities
2008-12-18 v1 Probability
Abstract
In an incomplete Brownian-motion market setting, we propose a convex monotonic pricing functional for nonattainable bounded contingent claims which is compatible with prices for attainable claims. The pricing functional is defined as the convex conjugate of a generalized entropy penalty functional and an interpretation in terms of tracking with instantaneously vanishing risk can be given.
Keywords
Cite
@article{arxiv.0804.0127,
title = {Convex pricing by a generalized entropy penalty},
author = {Johannes Leitner},
journal= {arXiv preprint arXiv:0804.0127},
year = {2008}
}
Comments
Published in at http://dx.doi.org/10.1214/07-AAP466 the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org)