Good–deal bounds are price bounds for a financial portfolio which depends on an individual trader's preferences. Mathematically, if is a set of portfolios with future outcomes which are "acceptable" to the trader, then define the function by
where is the set of final values for self-financing trading strategies. Then any price in the range does not provide a good deal for this trader, and this range is called the "no good-deal price bounds." [1] [2]
If then the good-deal price bounds are the no-arbitrage price bounds, and correspond to the subhedging and superhedging prices. The no-arbitrage bounds are the greatest extremes that good-deal bounds can take. [2] [3]
If where is a utility function, then the good-deal price bounds correspond to the indifference price bounds. [2]
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Good–deal bounds are price bounds for a financial portfolio which depends on an individual trader's preferences. Mathematically, if is a set of portfolios with future outcomes which are "acceptable" to the trader, then define the function by
where is the set of final values for self-financing trading strategies. Then any price in the range does not provide a good deal for this trader, and this range is called the "no good-deal price bounds." [1] [2]
If then the good-deal price bounds are the no-arbitrage price bounds, and correspond to the subhedging and superhedging prices. The no-arbitrage bounds are the greatest extremes that good-deal bounds can take. [2] [3]
If where is a utility function, then the good-deal price bounds correspond to the indifference price bounds. [2]
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cite journal}}
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help)