Financial Models with Defaultable Numéraires

Travis Fisher , Sergio Pulido (1, 2) , Johannes Ruf (3)

1 ENSIIE - Ecole Nationale Supérieure d'Informatique pour l'Industrie et l'Entreprise
2 LaMME - Laboratoire de Mathématiques et Modélisation d'Evry
3 Department of Mathematics London School of Economics

Financial models are studied where each asset may potentially lose value relative to any other. Conditioning on non-devaluation, each asset can serve as proper numéraire and classical valuation rules can be formulated. It is shown when and how these local valuation rules can be aggregated to obtain global arbitrage-free valuation formulas.

Mots clés: Devaluation; Non-classical valuation formulas; Defaultable numéraire

Domaines: Pricing [q-fin.PR]; Finance quantitative [q-fin.CP]; Probabilités [math.PR]

Travis Fisher, Sergio Pulido, Johannes Ruf. Financial Models with Defaultable Numéraires. Mathematical Finance, 2019, 29 (1), pp.117-136. ⟨10.1111/mafi.12178⟩. ⟨hal-01240736v4⟩