Pricing and hedging in incomplete markets with coherent risk
Probability
2008-12-02 v1 Risk Management
Abstract
We propose a pricing technique based on coherent risk measures, which enables one to get finer price intervals than in the No Good Deals pricing. The main idea consists in splitting a liability into several parts and selling these parts to different agents. The technique is closely connected with the convolution of coherent risk measures and equilibrium considerations. Furthermore, we propose a way to apply the above technique to the coherent estimation of the Greeks.
Keywords
Cite
@article{arxiv.math/0605064,
title = {Pricing and hedging in incomplete markets with coherent risk},
author = {Alexander S. Cherny and Dilip B. Madan},
journal= {arXiv preprint arXiv:math/0605064},
year = {2008}
}