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Title:A benchmark model for financial markets PDF Logo
Authors:Platen, Eckhard
Issue Date:2001
Series/Report no.:Discussion Papers, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes 2001,52
Abstract:This paper introduces a benchmark model for financial markets, which is based on the unique characterization of a benchmark portfolio that is chosen to be the growth optimal portfolio. The general structure of risk premia for asset prices and portfolios is derived. Furthermore, the short rate is obtained as an average of appreciation rates. The benchmark model is shown to be locally arbitrage free, however, it still permits some form of arbitrage. Finally, a subclass of arbitrage free contingent claim prices is derived.
Subjects:financial market model
contingent claim pricing
benchmark model
growth optimal portfolio
arbitrage amount
JEL:G10
G13
Persistent Identifier of the first edition:urn:nbn:de:kobv:11-10050040
Document Type:Working Paper
Appears in Collections:Discussion Papers, SFB 373, HU Berlin

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