Dynamic Models in Discrete Time
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To make it easier to approach to continuous-time models, we present here a dynamic model in discrete time and with a finite horizon. This allows us specify such concepts as self-financing, arbitrage and complete markets, and to show how martingales, though not part of the initial data of the model, can be used to give the problem a pleasing form.
KeywordsProbability Measure Conditional Expectation Martingale Measure Discount Price Arbitrage Opportunity
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