Mathematical Finance (q-fin.MF)
Wed, 07 Jun 2023
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1.Bachelier's Market Model for ESG Asset Pricing
Authors:Svetlozar Rachev, Nancy Asare Nyarko, Blessing Omotade, Peter Yegon
Abstract: Environmental, Social, and Governance (ESG) finance is a cornerstone of modern finance and investment, as it changes the classical return-risk view of investment by incorporating an additional dimension of investment performance: the ESG score of the investment. We define the ESG price process and integrate it into an extension of Bachelier's market model in both discrete and continuous time, enabling option pricing valuation.