Least-Squares Prices of Games
Abstract
What are the prices of random variables? In this paper, we define the least-squares prices of coin-flipping games, which are proved to be minimal, positive linear, and arbitrage-free. These prices depend both on a set of games that are available for investing simultaneously and on a risk-free interest rate. In addition, we show a case where the mean-variance portfolio theory is inappropriate.
- Publication:
-
arXiv Mathematics e-prints
- Pub Date:
- March 2007
- DOI:
- 10.48550/arXiv.math/0703079
- arXiv:
- arXiv:math/0703079
- Bibcode:
- 2007math......3079H
- Keywords:
-
- Mathematics - Optimization and Control;
- Quantitative Finance - Statistical Finance;
- 91B24 (Primary);
- 91B28 (Secondary)
- E-Print:
- 6 pages. We added Remarks 3.5 and 3.6. We revised Remark 3.6