Sharpe-ratio pricing and hedging of contingent claims in incomplete markets by convex programming

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dc.citation.epage2073en_US
dc.citation.issueNumber8en_US
dc.citation.spage2063en_US
dc.citation.volumeNumber44en_US
dc.contributor.authorPınar, M. Ç.en_US
dc.date.accessioned2015-07-28T11:58:13Z
dc.date.available2015-07-28T11:58:13Z
dc.date.issued2008-08en_US
dc.departmentDepartment of Industrial Engineeringen_US
dc.description.abstractWe analyze the problem of pricing and hedging contingent claims in a financial market described by a multi-period, discrete-time, finite-state scenario tree using an arbitrage-adjusted Sharpe-ratio criterion. We show that the writer’s and buyer’s pricing problems are formulated as conic convex optimization problems which allow to pass to dual problems over martingale measures and yield tighter pricing intervals compared to the interval induced by the usual no-arbitrage price bounds. An extension allowing proportional transaction costs is also given. Numerical experiments using S&P 500 options are given to demonstrate the practical applicability of the pricing scheme.en_US
dc.identifier.doi10.1016/j.automatica.2007.11.006en_US
dc.identifier.eissn1873-2836
dc.identifier.issn0005-1098
dc.identifier.urihttp://hdl.handle.net/11693/11636
dc.language.isoEnglishen_US
dc.publisherElsevieren_US
dc.relation.isversionofhttp://dx.doi.org/10.1016/j.automatica.2007.11.006en_US
dc.source.titleAutomaticaen_US
dc.subjectContingent Claimen_US
dc.subjectPricingen_US
dc.subjectHedgingen_US
dc.subjectSharpe Ratioen_US
dc.subjectMartingalesen_US
dc.subjectTransaction Costsen_US
dc.subjectConvex Programmingen_US
dc.titleSharpe-ratio pricing and hedging of contingent claims in incomplete markets by convex programmingen_US
dc.typeArticleen_US

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