PRICING FUTURES CONTRACTS IN INCOMPLETE MARKETS USING THE NUMERAIRE PORTFOLIO

摘要

As the numeraire portfolio is unique under complete as well as incomplete markets, it can be used to price contingent claims under incomplete markets. In this article, we applied the method to price futures contracts for the first time, and provided a new valuation model for futures contracts in a simplified incomplete financial market. The model has been tested for financial futures as well as commodity futures. The results show that the model functions well in these two kinds of futures contracts, however, it is more accurate in pricing financial futures.