Abstract
In an arbitrage-free economy, it is well-known that financial risks can be priced using equivalent martingale measures. We establish in this paper that, for general stochastic processes, the Wang Transform does not lead to a price which is consistent with the arbitrage-free price. Based on these results we must conclude that the Wang Transform cannot be a universal framework for pricing financial and insurance risks.
Original language | English |
---|---|
Pages (from-to) | 171-181 |
Number of pages | 11 |
Journal | Astin Bulletin |
Volume | 38 |
Issue number | 1 |
DOIs | |
Publication status | Published - May 2008 |
Externally published | Yes |