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Asset pricing with no exogenous probability measure

Cassese, Gianluca

In: Mathematical finance, 2008, vol. 18, no. 1, p. 23-54

In this paper we propose a model of financial markets in which agents have limited ability to trade and no probability is given from the outset. In the absence of arbitrage opportunities, assets are priced according to a probability measure that lacks countable additivity. Despite finite additivity, we obtain an explicit representation of the expected value with respect to the pricing measure,...

On the structure of finitely additive martingales

Cassese, Gianluca

Finitely additive martingales are the counterpart of finitely additive measures over filtered probability space. We study the structure of the Yosida Hewitt decomposition in such setting and obtaing a full characterisation. Based on this result we introduce a “conditional expectation” operator for finitely additive measures which has some properties in common with ordinary conditional...

Pricing and informational effciency of the MIB30 index options market : an analysis with high frequency data

Cassese, Gianluca ; Guidolin, Massimo

We analyze the pricing and informational effciency of the Italian market for options written on the most important stock index, the MIB30. We find several indications inconsistent with the hypothesis that the Italian MIBO is an effcient market. We report that a striking percentage of the data consists of option prices violating basic no-arbitrage conditions. This percentage declines but never...