In a complete market, Harrison and Pliska (1981) show that the arbitrage-free
price of contingent claims is given using the risk-neutral probability measure.
We also show that it is consistent with arbitrage-free
n+1] is arbitrage-free
complete and continuously open.
Julius Finance is a leading provider of credit analytics, and the first vendor to build an arbitrage-free
dynamic model for CDX and iTraxx tranches.
One can show this directly (24) or as a consequence of the theorem, because only prices consistent with risk-neutral valuation are arbitrage-free
Piazzesi develops an arbitrage-free
time-series model of yields that incorporates central bank policy.
Each spanning portfolio provides one estimate of the arbitrage-free
return series for the target division.
This implies in turn that the arbitrage-free
price of contingent claims is not unique.
Valuation of Energy Derivatives Kaushik Amin, Lehman Brothers, Victor Ng, Goldman Sachs and Craig Pirrong, Bauer College of Business at the University of Houston 16.