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Basically, if a contingent claim is replicable its value today is the value of the replicating strategy. If you suppose that the market is complete and that there are two equivalent pricing measures $\mathbb{Q}^1$ and $\mathbb{Q}^2$, the price of a claim $A$ is given either by $\mathbb{E}^{\mathbb{Q}^1}\left( A \right)$ or by $\mathbb{E}^{\mathbb{Q}^2}\left(...


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It really simplifies your life when dealing with valuation. As stated already a non-self-financing portfolio either generate or absorb cashflow. Such cash flows would need to be taken into account when valuing a certain derivative based on replication. So, in general, is way easier to just deal with a self-financing portfolio. On the other hand, when you ...


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