State prices
In financial economics, a state-price security, also called an Arrow–Debreu security (from its origins in the Arrow–Debreu model), a pure security, or a primitive security is a contract that agrees to pay one unit of a numeraire (a currency or a commodity) if a particular state occurs at a particular time in the future and pays zero numeraire in all the other states. The price of this security is the state price of this particular state of the world. The state price vector is the vector of state prices for all states. As such, any derivatives contract whose settlement value is a function of an underlying asset whose value is uncertain at contract date can be decomposed as a linear combination of its Arrow–Debreu securities, and thus as a weighted sum of its state prices.
Arrow-Debreau securityArrow-Debreu securityArrow securityArrow–Debreu modelArrow–Debreu securityAsset pricingComplete marketContingent claimCopy tradingCorporate financeFinancial economicsGérard DebreuHyperbolic absolute risk aversionLattice model (finance)Law of one priceMonte Carlo methods for option pricingNeoclassical financePure SecurityPure securityReal options valuationRisk-free bondRobert LitzenbergerState of the WorldState priceState price securityState price vectorStochastic discount factor
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State prices
In financial economics, a state-price security, also called an Arrow–Debreu security (from its origins in the Arrow–Debreu model), a pure security, or a primitive security is a contract that agrees to pay one unit of a numeraire (a currency or a commodity) if a particular state occurs at a particular time in the future and pays zero numeraire in all the other states. The price of this security is the state price of this particular state of the world. The state price vector is the vector of state prices for all states. As such, any derivatives contract whose settlement value is a function of an underlying asset whose value is uncertain at contract date can be decomposed as a linear combination of its Arrow–Debreu securities, and thus as a weighted sum of its state prices.
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In financial economics, a stat ...... a unique general equilibrium.
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In financial economics, a stat ...... ghted sum of its state prices.
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State prices
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