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What is Meant by ‘Complete’ and ‘Incomplete’ Markets

What is Meant by ‘Complete’ and ‘Incomplete’ Markets?

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A complete market is one wherein a derivative product can be artificially made by more fundamental instruments, like cash and the underlying asset. It usually includes dynamically rebalancing a portfolio of the easiest instruments, according to several formula or algorithm, to replicate too complicated product, the derivative. Of course, an incomplete market is one in that you can’t replicate the option along with simpler instruments.

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