Risk-neutral valuation with infinitely many trading dates (Q2471590)

\textit{A. Lyapunov} in [Bull. Acad. Sci. USSR, Ser. Math. 4, 465--478 (1940; Zbl 0024.38504)] proved that the range of any \(n\)-dimensional vector measure is compact, and it is also convex if the measure is atomless. This theorem has been extended in several directions and a recent line of research shows its tie with stopping time linked problems, closely related to many important topics in finance. This paper attempts to show some possible relationships between the Lyapunov theorem and the first fundamental theorem of asset pricing, a crucial issue in mathematical finance. It follows the idea in the sense that the probability space indicating the evolution of prices is given by a projective limit of probability measures. The second section of this paper presents the general framework and the financial market model. Further, it deals with those properties of financial economics that will apply throughout the article. The third section use the Lyapunov theorem in order to prove Theorem 4, a major result of this paper, since it is shown that the projectively equivalent martingale measure becomes equivalent if the Sharpe ratio is bounded from above and the market is complete. Section 4 presents Theorem 5, where the Lyapunov theorem applies again in order to show new conditions guaranteeing bounded Sharpe ratios. The last section concludes the article.