We introduce a criterion how to price derivatives in incomplete markets, which is based on the theory of optimal strategies in repeated multiplicative games. Arguments are presented why such growth-optimal strategies should be relevant to the problem of pricing derivatives. Under the assumptions...

How to model the dependence between defaults in a portfolio subject to credit risk is a question of great importance. The infectious default model of Davis and Lo offers a way to model the dependence. Every company defaulting in this model may 'infect' another company causing it to default. An...

We introduce a criterion how to price derivatives in incomplete markets, based on the theory of growth optimal strategy in repeated multiplicative games. We present reasons why these growth-optimal strategies should be particularly relevant to the problem of pricing derivatives. Under the...