A B C D E F G H I J K __L__ M N O P Q R S T U V W X Y Z

# Locally riskfree asset

A self-financing portfolio h is **locally risk-free** if

dV^{h}(t)=k(t) V^{h}(t)dt,

where k is an adapted process. If h is locally risk-free then k(t) should equal the short rate r(t) for all t in order to avoid arbitrage opportunities.

dV

where k is an adapted process. If h is locally risk-free then k(t) should equal the short rate r(t) for all t in order to avoid arbitrage opportunities.

Questions: Magnus Wiktorsson

Last update: 2009 Nov 12 12:23:09. Validate: HTML CSS

Centre for Mathematical Sciences, Box 118, SE-22100, Lund. Telefon: +46 46-222 00 00 (vx)