Gain, Loss, and Asset Pricing: It is Much Easier. A Note
SSE/EFI Working Paper in Economics and Finance No. 401
5 Pages Posted: 30 Oct 2000
Date Written: October 19, 2000
Bernardo and Ledoit (2000) develop a very appealing framework to compute pricing bounds based on what they call gain-loss ratio. Their method has many advantages and very interesting properties and so far one important drawback: the complexity of the numerical computation of the pricing bounds. In this note we provide a simple procedure for their computation which only entails solving a linear optimization program.
JEL Classification: C63, G12
Suggested Citation: Suggested Citation