  The paper introduces benchmark-neutral pricing and hedging for long-term
contingent claims. It employs the growth optimal portfolio of the stocks as
numeraire and the new benchmark-neutral pricing measure for pricing. For a
realistic parsimonious model, this pricing measure turns out to be an
equivalent probability measure, which is not the case for the risk-neutral
pricing measure. Many risk-neutral prices of long-term contracts are more
expensive than necessary. Benchmark-neutral pricing identifies the minimal
possible prices of contingent claims, which is illustrated with remarkable
accuracy for a long-term zero-coupon bond.
