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Complete market

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  1. In economics, a complete market is one in which the complete set of possible gambles on future states-of-the-world can be constructed with existing assets

    Source: Wikipedia Unhappy with this fact? more info
    created by user picturefactobot on November 26, 2008
  2. Formally, a market is complete with respect to a trading strategy if there exists a self-financing trading strategy such that at any time t, the returns of the two strategies are equal

    Source: Wikipedia Unhappy with this fact? more info
    created by user picturefactobot on November 26, 2008
  3. This is equal to stating that for a complete market, all cash flows for a trading strategy can be replicated by a similar synthetic trading strategy

    Source: Wikipedia Unhappy with this fact? more info
    created by user picturefactobot on November 26, 2008
  4. Because a trading strategy can be simplified into a set of simple contingent claims (a trading strategy that pays 1 in one state and 0 in every other state), a complete market can be generalized as the ability to replicate cash flows of all simple co

    Source: Wikipedia Unhappy with this fact? more info
    created by user picturefactobot on November 26, 2008
  5. For example, consider the put–call parity: A put option can be synthetically created by solving the parity for put: A put is synthesized by buying the call, investing the strike at the risk free rate, and shorting the stock

    Source: Wikipedia Unhappy with this fact? more info
    created by user picturefactobot on November 26, 2008
  6. In order for a market to be complete, it must be possible to instantaneously enter into any position regarding any future state of the market

    Source: Wikipedia Unhappy with this fact? more info
    created by user picturefactobot on November 26, 2008
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