Faculty of Actuarial Science & Insurance Seminar with Dr Hirbod Assa - Institute for Financial and Actuarial Mathematics

The existing literature on market-consistent valuation (MCV) always assumes that the liquid assets cannot change the market valuation of a risky portfolio. In other words, an MCV needs also to be a hedging consistent valuation (or HCV). In this talk, we will discuss how HCV can be a restrictive condition when it comes to MCV. Then we consider a pure MCV, or MCV without hedging, and discuss how one can relate it to market sub-consistent valuation (MSCV). The discussions will follow by proposing methods for real word implement.

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