Pricing of Non-redundant Derivatives in a Complete Market

Elyès Jouini (1) , Koehl Pierre-François (2) , Abdelhamid Bizid (3)

1 CEREMADE - CEntre de REcherches en MAthématiques de la DEcision
2 CREST - Centre de Recherche en Économie et Statistique
3 CERMSEM - CEntre de Recherche en Mathématiques, Statistique et Économie Mathématique

We consider a complete financial market with primitive assets and derivatives on these primitive assets. Nevertheless, the derivative assets are non-redundant in the market, in the sense that the market is complete, only with their existence. In such a framawork, we derive an equilibrium restriction on the admissible prices of derivatives assets. The equilibrium condition imposes a well-ordering principle equivalent martingale measures. This restriction is preference free and applies whenever the utility functions belong to the general class of Von-Neumann Morgenstern functions. We provide numerical examples that show the applicability of restriction for the computation of option prices

Mots clés: pricing

Domaines: Economies et finances

Elyès Jouini, Koehl Pierre-François, Abdelhamid Bizid. Pricing of Non-redundant Derivatives in a Complete Market. Review of Derivatives Research, 1998, 2 (4), pp.287-314. ⟨10.1007/BF01574150⟩. ⟨halshs-00167151⟩