Beyond Arbitrage: Good‐Deal Asset Price Bounds in Incomplete Markets

By John H. Cochrane, Jesús Saá-Requejo. Journal of Political Economy, 2000

541 citations recorded by the source corpus.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/4d5ba8b45077501f44f7037d0c891ac3286f5dc6

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Citations in the corpus

Sharpe ratios in term structure models (2010, methodology): “1 Cochrane and Saa-Requejo (2000) use the link between Sharpe ratios and stochastic discount factors to place “good-deal” bounds on the prices of derivative securities.”
Fundamental Theorems of Asset Pricing for Good Deal Bounds (2004, background): “It analyzes tighter good deal bounds, which arise from the exclusion not only of arbitrages, but a larger acceptance set of good deals (Cochrane and Saá-Requejo 2000).”
Empirical option pricing: a retrospection (2003, background): “Cochrane and SaY a-Requejo (2000) provide one possible starting point, by deriving option pricing bounds from plausible instantaneous conditional Sharpe ratio constraints on the risk premia on untraded risks.”
Pricing and hedging in incomplete markets (2001, unknown): “For example, Cochrane and Sa¶a Requejo [13, 14], Ledoit [29], and Bernardo and Ledoit [6] all use the Sharpe ratio as a criterion for acceptability.”
Variance Bounds on the Permanent and Transitory Components of Stochastic Discount Factors (2012, unknown): “…(and transitory) component from an asset pricing model is denominated in the same units of riskiness as the bounds recovered from the data, a trait that our framework shares also with the studies of Hansen and Jagannathan (1991); Bernardo and Ledoit (2000), and Cochrane and Saa-Requejo (2000).”
Demand-Based Option Pricing (2009, unknown): “Cochrane and Saa-Requejo (2000) and Bernardo and Ledoit (2000) derive tighter option-pricing bounds by restricting the Sharpe ratio or gain/loss ratio to be below an arbitrary level, and Constantinides and Perrakis (2002) derive bounds using stochastic dominance for small option positions.”
Mispricing of S&P 500 Index Options (2006, methodology): “To operationalize this concept, we would like to investigate bounds on the elasticity or the variability of the pricing kernel along the lines of Bernardo and Ledoit (2000) and Cochrane and Saa-Requejo (2000).”
Losing Money on Arbitrages: Optimal Dynamic Portfolio Choice in Markets with Arbitrage Opportunities (2000, background): “Dybvig and Huang (1988) and Cox and Huang (1989) demonstrate that requiring admissible trading strategies to satisfy the non-negative wealth condition Wt > 0 for all t, 0 ≤ t ≤ T , eliminates these types of unrealistic trading strategies.”
Generalised Sharpe Ratios and Asset Pricing in Incomplete Markets (2003, unknown): “…of CAPM and APT attractive investments became associated with high Sharpe Ratios, both in theoretical and empirical work (Ross (1976), Shanken (1992), Cochrane and Saá-Requejo (2000)), but µCerný and Hodges (2001) show that one can impose the good-deal restrictions with considerable generality.”
Pricing with Coherent Risk (2006, background): “Cochrane and SaáRequejo [17] defined a good deal as a trade with unusually high Sharpe ratio, Bernardo and Ledoit [6] based their definition on another gain to loss ratio, while Černý and Hodges [11] proposed a generalization of both definitions (see also the paper [7] by Bjork and Slinko, which ext”