RT Generic
T1 Good deal measurement in asset pricing: Actuarial and financial implications
A1 Balbás, Alejandro
A1 Garrido, José
A1 Okhrati, Ramin
AB We will integrate in a single optimization problem a risk measurebeyond the variance and either arbitrage free real market quotations or financial pricingrules generated by an arbitrage free stochastic pricing model. A sequence of investmentstrategies such that the couple (risk; price) diverges to (-∞, -∞) will be calledgood deal. We will see that good deals often exist in practice, and the paper mainobjective will be to measure the good deal size. The provided good deal measures willequal an optimal ratio between both risk and price, and there will exist alternativeinterpretations of these measures. They will also provide the minimum relative (perdollar) price modification that prevents the good deal existence. Moreover, they willbe a crucial instrument to detect those securities or marketed claims which are overor under-priced. Many classical actuarial and financial optimization problems maygenerate wrong solutions if the used market quotations or stochastic pricing modelsdo not prevent the good deal existence. This fact will be illustrated in the paper,and it will be pointed out how the provided good deal measurement may be useful toovercome this caveat. Numerical experiments will be yielded as well.
SN 1989-8843
YR 2016
FD 2016-09-12
LK https://hdl.handle.net/10016/23546
UL https://hdl.handle.net/10016/23546
LA eng
NO Research partially supported by Ministerio de Economía (grant ECO2012-39031-C02-01, Spain) and the Natural Sciences and Engineering Research Council (NSERC) of Canada grant 36860-2012.
DS e-Archivo
RD 17 jul. 2024