Shadow Boxing the Market: Option Pricing Without a Safe Haven
One of the most sacred assumptions in financial modeling is the existence of a traded risk-free asset. It anchors discounting, defines arbitrage boundaries, and supports the edifice of Black–Scholes. But what happens when you remove this pillar? Can we still price options, hedge risk, or extract information about funding conditions? In a striking extension of the Lindquist–Rachev (LR) framework, Ziyao Wang shows that not only is it possible — it may reveal financial dynamics that conventional models obscure. ...