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Erschienen in:
2010 | OriginalPaper | Buchkapitel
Pricing Without Equivalent Martingale Measures Under Complete and Incomplete Observation
verfasst von : Giorgia Galesso, Wolfgang J. Runggaldier
Erschienen in: Contemporary Quantitative Finance
Verlag: Springer Berlin Heidelberg
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Traditional arbitrage pricing theory is based on martingale measures. Recent studies show that there are situations when there does not exist an equivalent martingale measure and so the question arises: what can one do with pricing and hedging in this situation? We mention here two approaches to this effect that have appeared in the literature, namely the “Fernholz-Karatzas” approach and Platen’s “Benchmark approach” and discuss their relationships both in models where all relevant quantities are fully observable as well as in models where this is not the case and, furthermore, not all observables are also investment instruments.