Back to Search
Start Over
Time-consistent and market-consistent evaluations
- Source :
- Mathematical Finance vol.24 (2014) date: 2014-01-01 nr.1 p.25-65 [ISSN 0960-1627]
- Publication Year :
- 2014
-
Abstract
- We consider evaluation methods for payoffs with an inherent financial risk as encountered for instance for portfolios held by pension funds and insurance companies. Pricing such payoffs in a way consistent to market prices typically involves combining actuarial techniques with methods from mathematical finance. We propose to extend standard actuarial principles by a new market-consistent evaluation procedure which we call "two-step market evaluation." This procedure preserves the structure of standard evaluation techniques and has many other appealing properties. We give a complete axiomatic characterization for two-step market evaluations. We show further that in a dynamic setting with continuous stock prices every evaluation which is time-consistent and market-consistent is a two-step market evaluation. We also give characterization results and examples in terms of g-expectations in a Brownian-Poisson setting.
Details
- Database :
- OAIster
- Journal :
- Mathematical Finance vol.24 (2014) date: 2014-01-01 nr.1 p.25-65 [ISSN 0960-1627]
- Notes :
- DOI: 10.1111/mafi.12026, English
- Publication Type :
- Electronic Resource
- Accession number :
- edsoai.on1376704890
- Document Type :
- Electronic Resource