Browsing Department of Mathematical Sciences by browse.metadata.advisor "Capinski, Maciej"
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- ItemGrowth optimal portfolios and real world pricing(Stellenbosch : Stellenbosch University, 2008-12) Ramarimbahoaka, Dimbinirina; Kopp, Ekkehard; Capinski, Maciej; Stellenbosch University. Faculty of Science. Dept. of Mathematical Sciences.In the Benchmark Approach to Finance, it has been shown that by taking the Growth Optimal Portfolio as numéraire, a candidate for a pricing derivatives formula under the real world probability can be given. This result allows us to price in an incomplete financial market model. The result comes from two different approaches. In the first approach we use the supermartingale property of portfolios in units of the benchmark portfolio which leads to the fact that an equivalent measure is not needed. In the second approach the numéraire property of the Growth Optimal Portfolio is used. The numéraire portfolio defines an equivalent martingale measure and by change of measure using the Radon-Nikodým derivative, a real world pricing formula is derived which is the same as the one given by the first approach stated above.