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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 401:
Gain, Loss, and Asset Pricing: It is Much Easier. A note

Iņaki R. Longarela ()

Abstract: Bernardo and Ledoit (2000) develop a very appealing framework to compute pricing bounds based on the so-called 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 an simple procedure for their computation which only entails solving a linear optimization program.

Keywords: asset price bounds; gain-loss ratio; linear programming; (follow links to similar papers)

JEL-Codes: C63; G12; (follow links to similar papers)

5 pages, September 4, 2000, Revised October 18, 2000

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