Risk and Derivative Price

We consider an asset market traded three types of assets: the risk–free asset, the market portfolio and derivatives written on the market portfolio return. We determine a sufficient condition to guarantee that noise risk monotonically changes their derivatives. The condition is that Arrow–Pratt absolute risk aversion is decreasing and convex.

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Year of publication:	2007-03
Authors:	Osaki, Yusuke
Institutions:	Risk and Sustainable Management Group (RSMG), School of Economics
Subject:	Derivative price \| Noise risk \| Nonlineality \| Risk aversion

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Extent:	application/pdf
Series:	Risk & Uncertainty Working Papers.
Type of publication:	Book / Working Paper
Notes:	Number WP2R07
Classification:	D51 - Exchange and Production Economies ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; G12 - Asset Pricing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008599200