Expected gain-loss pricing and hedging of contingent claims in incomplete markets by linear programming

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dc.citation.epage785en_US
dc.citation.issueNumber3en_US
dc.citation.spage770en_US
dc.citation.volumeNumber201en_US
dc.contributor.authorPınar, M. Ç.en_US
dc.contributor.authorSalih, A.en_US
dc.contributor.authorCamcı, A.en_US
dc.date.accessioned2016-02-08T09:59:26Z
dc.date.available2016-02-08T09:59:26Z
dc.date.issued2010en_US
dc.departmentDepartment of Industrial Engineeringen_US
dc.departmentDepartment of Managementen_US
dc.description.abstractWe analyze the problem of pricing and hedging contingent claims in the multi-period, discrete time, discrete state case using the concept of a "λ gain-loss ratio opportunity". Pricing results somewhat different from, but reminiscent of, the arbitrage pricing theorems of mathematical finance are obtained. Our analysis provides tighter price bounds on the contingent claim in an incomplete market, which may converge to a unique price for a specific value of a gain-loss preference parameter imposed by the market while the hedging policies may be different for different sides of the same trade. The results are obtained in the simpler framework of stochastic linear programming in a multi-period setting, and have the appealing feature of being very simple to derive and to articulate even for the non-specialist. They also extend to markets with transaction costs.en_US
dc.identifier.doi10.1016/j.ejor.2009.02.031en_US
dc.identifier.eissn1872-6860
dc.identifier.issn0377-2217
dc.identifier.urihttp://hdl.handle.net/11693/22388
dc.language.isoEnglishen_US
dc.publisherElsevieren_US
dc.relation.isversionofhttp://dx.doi.org/10.1016/j.ejor.2009.02.031en_US
dc.source.titleEuropean Journal of Operational Researchen_US
dc.subjectContingent claimen_US
dc.subjectHedgingen_US
dc.subjectMartingalesen_US
dc.subjectPricingen_US
dc.subjectStochastic linear programmingen_US
dc.subjectTransaction costsen_US
dc.subjectContingent claimen_US
dc.subjectHedgingen_US
dc.subjectMartingalesen_US
dc.subjectPricingen_US
dc.subjectStochastic linear programmingen_US
dc.subjectTransaction costsen_US
dc.subjectCommerceen_US
dc.subjectDynamic programmingen_US
dc.subjectLinear programmingen_US
dc.subjectLinearizationen_US
dc.subjectOptimizationen_US
dc.subjectCostsen_US
dc.titleExpected gain-loss pricing and hedging of contingent claims in incomplete markets by linear programmingen_US
dc.typeArticleen_US

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