Atomic sublattices and basic derivatives in finance (Q2194075)

Sublattices of a vector lattice \(E\) where the order on \(E\) is defined by a countable family of linear functionals are considered. Extremal points (atoms) are characterized as vectors with minimal support sets with respect to functionals \(\{f_i\}\) defining the order. Here the support set of a vector \(u\) is \(\{ i: f_i(u) \ne 0\}\). Continuing this analysis leads to a characterization of the sublattice being atomic. Moreover, the author is then able to establish the existence of a basic sequence of extremal points \(\{b_n\}\), namely, a generating collection of pairwise disjoint extremal points. For these lattices, it is then shown that for every vector \(u\ge 0\), there is a sequence of scalars \(\{\alpha_n\}\) so that \(u\) is the is the supremum of \(\{ \alpha_nb_n\}\). Further, it is shown that the partial sums increase with supremum \(u\) and are pointwise convergent to \(u\). These concepts are then used to answer in the affirmative the problem of the existence of basic derivative assets in financial markets posed by \textit{D. J. Brown} and \textit{S. A. Ross} [Econ. Theory 1, No. 1, 3--12 (1991; Zbl 0807.90045)]. Other results related to these economic questions are provided.