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6 of 6 people found the following review helpful:
5.0 out of 5 stars
A great book to have,
This review is from: Stochastic Portfolio Theory (Hardcover)
The book does not have a problem about distinguishing between real world measure and the risk neutral measure as another reviewer has stated. The reason being is that return on the market portfolio can be used as the correct deflator to price securities. One can check the Heath and Platen's work on benchmarking to discover that the risk neutral measure may not always exist, while fair pricing in incomplete markets can still be attained. Fernholz's book actually tells how to construct a market portfolio and readjust it depending on performance and distribution assumptions. Moreover, it can be used as a good source to tie the language of stochastic processes with the classical portfolio theories in economics.
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Stochastic Portfolio Theory by Erhard Robert Fernholz (Hardcover - April 12, 2002)
$115.00 $91.73
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