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Financial models with defaultable numéraires
Author(s) -
Fisher Travis,
Pulido Sergio,
Ruf Johannes
Publication year - 2019
Publication title -
mathematical finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.98
H-Index - 81
eISSN - 1467-9965
pISSN - 0960-1627
DOI - 10.1111/mafi.12178
Subject(s) - valuation (finance) , arbitrage , economics , financial economics , mathematical economics , econometrics , asset (computer security) , financial modeling , finance , actuarial science , microeconomics , computer science , computer security
Financial models are studied where each asset may potentially lose value relative to any other. Conditioning on nondevaluation, each asset can serve as proper numéraire and classical valuation rules can be formulated. It is shown when and how these local valuation rules can be aggregated to obtain global arbitrage‐free valuation formulas.