Non-Linear Asset Valuation on Markets with Frictions

A.M.B. De Waegenaere, R. Kast, A. Lapied

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This paper provides a non-linear pricing rule for the valuation of assets on financial markets with intermediaries.The non-linearity arises from the fact that dealers charge a price for their intermediation between buyer and seller. The pricing rule we propose is an alternative for the wellknown no-arbitrage pricing on markets without frictions.The price of an asset equals the signed Choquet integral of its discounted payo with respect to a concave signed capacity.We show that this pricing rule is consistent with equilibrium. Furthermore, equilibria are shown to satisfy a notion of constrained Pareto optimality.
Original languageEnglish
Place of PublicationTilburg
PublisherOperations research
Number of pages15
Publication statusPublished - 1996

Publication series

NameCentER Discussion Paper


  • game theory
  • duopoly


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