| Authors |
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| Publication date |
2008
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| Journal |
Insurance: Mathematics & Economics
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| Volume | Issue number |
42 | 2
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| Pages (from-to) |
540-547
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| Organisations |
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Faculty of Economics and Business (FEB) - Amsterdam School of Economics Research Institute (ASE-RI)
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Faculty of Economics and Business (FEB) - Amsterdam Business School Research Institute (ABS-RI)
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| Abstract |
We present an axiomatic characterization of price measures that are superadditive and comonotonic additive for normally distributed random variables. The price representation derived involves a probability measure transform that is closely related to the Esscher transform, and we call it the Esscher-Girsanov transform. In a financial market in which the primary asset price is represented by a stochastic differential equation with respect to Brownian motion, the price mechanism based on the Esscher-Girsanov transform can generate approximate-arbitrage-free financial derivative prices.
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| Document type |
Article
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| Published at |
https://doi.org/10.1016/j.insmatheco.2007.04.001
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