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      On the martingale-fair index of return for investment funds

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          Abstract

          A concept of martingale-fair index of return, consistent with Arbitrage Free Pricing Theory, is introduced. An explicit formula for the average rate of return of a group of investment/pension funds in a discrete time stochastic model is derived and several properties of this index are shown. In particular, it is proven to be martingale-fair, i.e. be a martingale provided the prices of assets on the financial market form a vector martingale. The problem of merger of the funds is treated in detail.

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          Author and article information

          Journal
          2015-01-15
          Article
          1501.03768
          6497de61-a5f4-4e6b-96f5-aaed558bd6b9

          http://arxiv.org/licenses/nonexclusive-distrib/1.0/

          History
          Custom metadata
          18 pages
          q-fin.PM math.PR

          Probability,Portfolio management
          Probability, Portfolio management

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