No-arbitrage in discrete-time markets with proportional transaction costs and general information structure (Q854277)

The author discusses the no-arbitrage condition in a financial market with proportional transaction costs and imperfect information. From a mathematical point of view, this corresponds to the situation where the agent's filtration \(\mathbb{H}\) does not contain the filtration \(\mathbb{F}\) induced by the price processes of the financial assets. The aim of this paper is to extend the result stating the martingale property of optional projection of asset price on \(\mathbb H\), under some probability measure \(Q\). The approach is such that the wealth process \(V\) is written as \(V_t=\sum_{s\leq t} F_s(\eta_s)\) (\(\eta\) is an order process) for some sequence of random maps \(F=(F_t)\), which are called conversion process. It converses orders into net exchanges. In the no-friction case the previous result of \textit{Y. Kabanov} and \textit{C. Stricker} [The Dalang-Morton-Willinger theorem under delayed and restricted information, Preprint (2003)] is retrieved. Additionally, a new model based on simple orders is proposed, which appears to be powerful whatever the information structure is.