Journal article
Robust Stochastic Discount Factors
Abstract
When the market is incomplete, a new non-redundant derivative security cannot be priced by no-arbitrage arguments alone. Moreover, there will be a multiplicity of stochastic discount factors and each of them may give a different price for the new derivative security. This paper develops an approach to the selection of a stochastic discount factor for pricing a new derivative security. The approach is based on the idea that the price of a …
Authors
Boyle P; Feng S; Tian W; Wang T
Journal
Review of Financial Studies, Vol. 21, No. 3, pp. 1077–1122
Publisher
Oxford University Press (OUP)
Publication Date
May 2008
DOI
10.1093/rfs/hhm067
ISSN
0893-9454