Risk-neutral parameter shifts and derivatives pricing in discrete time

Deskripsi

We obtain a large class of discrete-time risk neutral valuation relationships, or "preference -free" derivates pricing models, by imposing a simple restriction on the state-price density process. The risk neutral stock return and forward rate dynamics are obtained by changing only a location parameter, which can de determined independent of the preference and true location parameters. The Gaussian models of Rubinstein (1976), Brennan (1979), and Camera (2003), and the gamma model of Heston (1993) are all special cases. .Printed Journal