Multidimensional Models: Martingale Approach

Tomas Björk

in Arbitrage Theory in Continuous Time

Second edition

Published in print March 2004 | ISBN: 9780199271269
Published online October 2005 | e-ISBN: 9780191602849 | DOI:

Series: Oxford Finance Series

Multidimensional Models: Martingale Approach

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This chapter analyses a multidimensional model using the martingale machinery of Chapter 10. This model is more general than the one used in the previous chapter to obtain more general results, and enhance the understanding of the pricing and hedging problems for Wiener driven models. A self-contained proof of the Second Fundamental Theorem is presented. A practice exercise is included.

Keywords: martingale approach; multidimensional model; arbitrage; completeness; pricing; Second Fundamental Theorem; risk

Chapter.  5570 words. 

Subjects: Financial Markets

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