On the implied market price of risk under the stochastic numéraire
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This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a numéraire. An equivalent martingale measure is not unique for this market, and there are non-replicable claims. Some rational choices of the equivalent martingale measures are suggested and discussed, including implied measures calculated from bond prices constructed as a risk-free investment with deterministic payoff at the terminal time. This leads to possibility to infer a implied market price of risk process from observed historical bond prices.
The final publication is available at Springer via http://dx.doi.org/10.1007/s10436-017-0315-y
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