Valuing contingent claims with different types of market incompleteness

Previous research has shown that frictions might have a signiﬁcant impact on the value of a contingent claim, as discussed, for example, in Karatzas & Kou (1996)and Collin-Dufresne & Hugonnier (2002). We consider two types of frictions particularly important: frictions related to trading, such as portfolio constraints, andfrictions related to information. Although both types of frictions have b een considered in the literature, they have never been addressed in one model. In this paperwe develop a framework for hedging and valuing American contingent claims witharbitrary payoffs and inﬁnite maturity in the presence of both portfolio constraints and incomplete information.

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Year of publication:	2005-05-01
Authors:	Murawskim, Carsten
Institutions:	Institut für Schweizerisches Bankwesen <Zürich> ; National Centre of Competence in Research North South <Bern>
Subject:	Unternehmensbewertung \| Portfoliomanagement \| portfolio management \| Nutzenmaximierung

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Extent:	38 p. application/pdf
Series:	Universität Zürich - Institut für Schweizerisches Bankwesen - Working Papers Working Paper ; No. 186 (2005)
Type of publication:	Book / Working Paper
Language:	English
Classification:	Corporate finance and investment policy. Other aspects ; Individual Working Papers, Preprints ; USA
Source:	USB Cologne (business full texts)