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.


Issue Date:
2007
Publication Type:
Working or Discussion Paper
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/151179
PURL Identifier:
http://purl.umn.edu/151179
Total Pages:
12
JEL Codes:
D51; D81; G12
Series Statement:
Risk and Uncertainty Program
R07/2




 Record created 2017-04-01, last modified 2019-08-29

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