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Pricing and hedging in incomplete markets with coherent risk

Alexander S. Cherny·Dilip B. Madan
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Abstract

We propose a pricing technique based on coherent risk measures, which enables one to get finer price intervals than in the No Good Deals pricing. The main idea consists in splitting a liability into several parts and selling these parts to different agents. The technique is closely connected with the convolution of coherent risk measures and equilibrium considerations. Furthermore, we propose a way to apply the above technique to the coherent estimation of the Greeks.

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BibTeXRIS

Alexander S. Cherny, Dilip B. Madan. 2006-05-02. Pricing and hedging in incomplete markets with coherent risk. https://arxiv.org/abs/math/0605064

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