Bibliographische Detailangaben
| Titel: |
Benchmark-neutral pricing. |
| Autoren: |
Platen, Eckhard1 (AUTHOR) eckhard.platen@uts.edu.au |
| Quelle: |
Quantitative Finance. Nov2025, p1-13. 13p. 6 Illustrations. |
| Schlagwörter: |
*HEDGING (Finance), *PORTFOLIO performance, *DERIVATIVE securities, *PRICES, *FINANCIAL instruments, PROBABILITY measures |
| Abstract: |
The paper proposes benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numéraire and the new benchmark-neutral pricing measure for pricing. For the assumed ‘natural’ dynamics of a well-diversified stock portfolio, which are those of the continuous limit of a branching process of diversified wealth in some activity time, this pricing measure turns out to be an equivalent probability measure. This is not the case for the putative risk-neutral pricing measure. Benchmark-neutral pricing identifies the minimal possible prices of contingent claims. Risk-neutral prices of long-term contracts can be significantly more expensive than necessary. The extremely accurate hedge of a long-term zero-coupon bond illustrates the proposed pricing and hedging method. [ABSTRACT FROM AUTHOR] |
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