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A pricing formula for delayed claims: appreciating the past to value the future
| File | Description | Size | Format | |
|---|---|---|---|---|
 s11579-022-00331-7.pdf | Published version | 487.75 kB | Adobe PDF | View/Open |
| Title: | A pricing formula for delayed claims: appreciating the past to value the future |
| Authors: | Biffis, E Goldys, B Prosdocimi, C Zanella, M |
| Item Type: | Journal Article |
| Abstract: | We consider the valuation of contingent claims with delayed dynamics in a Samuelson complete market model. We find a pricing formula that can be decomposed into terms reflecting the current market values of the past and the future, showing how the valuation of prospective cashflows cannot abstract away from the contribution of the past. As a practical application, we provide an explicit expression for the market value of human capital in a setting with wage rigidity. The formula we derive has successfully been used to explicitly solve the infinite dimensional stochastic control problems addressed in Biffis et al. (SIAM J Control Optim 58(4):1906–1938, 2020), Djeiche et al. (Stoch Process Appl 145:48–85, 2022) and Biagini et al. (SIAM J Financial Math 13(3):1004–1039, 2022). |
| Issue Date: | 1-Jun-2023 |
| Date of Acceptance: | 29-Dec-2022 |
| URI: | http://hdl.handle.net/10044/1/101738 |
| DOI: | 10.1007/s11579-022-00331-7 |
| ISSN: | 1862-9660 |
| Publisher: | Springer |
| Start Page: | 175 |
| End Page: | 202 |
| Journal / Book Title: | Mathematics and Financial Economics |
| Volume: | 17 |
| Copyright Statement: | © The Author(s) 2023. Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article’s Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article’s Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/. |
| Publication Status: | Published |
| Online Publication Date: | 2023-01-13 |
| Appears in Collections: | Imperial College Business School |
This item is licensed under a Creative Commons License
