Consistent price systems under model uncertainty (Q261917): Difference between revisions
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The authors give a version of the fundamental theorem of asset pricing for discrete-time models with transaction costs and uncertainty. The investment opportunities in the model are described by a set-valued stochastic process. For each trading day there is given a solvency cone \(K_t\) -- a random set of positions that can be turned into nonnegative ones by immediate exchange (accounting for transaction costs). The \(K_t\) is a convex cone generated by a finite number of vectors. The set \(K^\ast_t\backslash\{0\}\) is interpreted as the set of possible frictionless prices for assets. For each moment, there is given a nonempty convex set of probability measures \(\mathcal{P}_t\) that represents the model uncertainty. The authors define two properties of the model. The first one, \(\text{NA}_2(\mathcal{P})\), is an augmentation of the no-arbitrage condition. It states that \(\zeta\in K_{t+1}\) implies \(\zeta\in K_t\) (\(\mathcal{P}\)-quasi surely). The second one, PCE (price system is extendable), states that for each measurable random variable \(Y\) taking values in \(\operatorname{int} K^\ast_t\) there exists a probability measure \(Q\) and a stochastic process \((Z_s)_{s=t,\dots,T}\) starting as \(Y\), such that \(Z_s\in K^\ast_s\) and \(Z_s\) is a \(Q\)-martingale. The main result of the article states that \(\text{NA}_2(\mathcal{P})\) and PCE are equivalent. | |||
Property / review text: The authors give a version of the fundamental theorem of asset pricing for discrete-time models with transaction costs and uncertainty. The investment opportunities in the model are described by a set-valued stochastic process. For each trading day there is given a solvency cone \(K_t\) -- a random set of positions that can be turned into nonnegative ones by immediate exchange (accounting for transaction costs). The \(K_t\) is a convex cone generated by a finite number of vectors. The set \(K^\ast_t\backslash\{0\}\) is interpreted as the set of possible frictionless prices for assets. For each moment, there is given a nonempty convex set of probability measures \(\mathcal{P}_t\) that represents the model uncertainty. The authors define two properties of the model. The first one, \(\text{NA}_2(\mathcal{P})\), is an augmentation of the no-arbitrage condition. It states that \(\zeta\in K_{t+1}\) implies \(\zeta\in K_t\) (\(\mathcal{P}\)-quasi surely). The second one, PCE (price system is extendable), states that for each measurable random variable \(Y\) taking values in \(\operatorname{int} K^\ast_t\) there exists a probability measure \(Q\) and a stochastic process \((Z_s)_{s=t,\dots,T}\) starting as \(Y\), such that \(Z_s\in K^\ast_s\) and \(Z_s\) is a \(Q\)-martingale. The main result of the article states that \(\text{NA}_2(\mathcal{P})\) and PCE are equivalent. / rank | |||
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Property / reviewed by | |||
Property / reviewed by: Paweł Kliber / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91G99 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 91B25 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 60G42 / rank | |||
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Property / Mathematics Subject Classification ID | |||
Property / Mathematics Subject Classification ID: 93E20 / rank | |||
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Property / zbMATH DE Number | |||
Property / zbMATH DE Number: 6560417 / rank | |||
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Property / zbMATH Keywords | |||
fundamental theorem of asset pricing | |||
Property / zbMATH Keywords: fundamental theorem of asset pricing / rank | |||
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Property / zbMATH Keywords | |||
transaction costs | |||
Property / zbMATH Keywords: transaction costs / rank | |||
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model uncertainty | |||
Property / zbMATH Keywords: model uncertainty / rank | |||
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solvency cone | |||
Property / zbMATH Keywords: solvency cone / rank | |||
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set-valued stochastic processes | |||
Property / zbMATH Keywords: set-valued stochastic processes / rank | |||
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random sets | |||
Property / zbMATH Keywords: random sets / rank | |||
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Property / MaRDI profile type | |||
Property / MaRDI profile type: MaRDI publication profile / rank | |||
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Property / OpenAlex ID | |||
Property / OpenAlex ID: W1597670103 / rank | |||
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Property / arXiv ID: 1408.5510 / rank | |||
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links / mardi / name | links / mardi / name | ||
Latest revision as of 12:50, 18 April 2024
scientific article
Language | Label | Description | Also known as |
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English | Consistent price systems under model uncertainty |
scientific article |
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Consistent price systems under model uncertainty (English)
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29 March 2016
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The authors give a version of the fundamental theorem of asset pricing for discrete-time models with transaction costs and uncertainty. The investment opportunities in the model are described by a set-valued stochastic process. For each trading day there is given a solvency cone \(K_t\) -- a random set of positions that can be turned into nonnegative ones by immediate exchange (accounting for transaction costs). The \(K_t\) is a convex cone generated by a finite number of vectors. The set \(K^\ast_t\backslash\{0\}\) is interpreted as the set of possible frictionless prices for assets. For each moment, there is given a nonempty convex set of probability measures \(\mathcal{P}_t\) that represents the model uncertainty. The authors define two properties of the model. The first one, \(\text{NA}_2(\mathcal{P})\), is an augmentation of the no-arbitrage condition. It states that \(\zeta\in K_{t+1}\) implies \(\zeta\in K_t\) (\(\mathcal{P}\)-quasi surely). The second one, PCE (price system is extendable), states that for each measurable random variable \(Y\) taking values in \(\operatorname{int} K^\ast_t\) there exists a probability measure \(Q\) and a stochastic process \((Z_s)_{s=t,\dots,T}\) starting as \(Y\), such that \(Z_s\in K^\ast_s\) and \(Z_s\) is a \(Q\)-martingale. The main result of the article states that \(\text{NA}_2(\mathcal{P})\) and PCE are equivalent.
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fundamental theorem of asset pricing
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transaction costs
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model uncertainty
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solvency cone
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set-valued stochastic processes
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random sets
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