No-arbitrage of second kind in countable markets with proportional transaction costs

DOI10.1214/11-AAP825MaRDI QIDQ1948693zbMATH OpenFDO

Authors Bruno Bouchard, Erik Taflin

Publication date 24 April 2013

Published in The Annals of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1008.3276, https://projecteuclid.org/euclid.aoap/1360682019

zbMATH Keywords

bond marketcountable infinite number of tradable assetsNo-arbitrage, proportional transaction costs

Mathematics Subject Classification ID

Martingales with discrete parameter (60G42) Corporate finance (dividends, real options, etc.) (91G50)

Abstract: Motivated by applications to bond markets, we propose a multivariate framework for discrete time financial markets with proportional transaction costs and a countable infinite number of tradable assets. We show that the no-arbitrage of second kind property (NA2 in short), recently introduced by Rasonyi for finite-dimensional markets, allows us to provide a closure property for the set of attainable claims in a very natural way, under a suitable efficient friction condition. We also extend to this context the equivalence between NA2 and the existence of many (strictly) consistent price systems.

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Cited in

(11)

• Essential supremum with respect to a random partial order
• Essential supremum and essential maximum with respect to random preference relations
• Consistent price systems under model uncertainty
• Robust no-free lunch with vanishing risk, a continuum of assets and proportional transaction costs
• No-arbitrage in discrete-time markets with proportional transaction costs and general information structure
• Robust no arbitrage of the second kind with a continuum of assets and proportional transaction costs
• Asymptotic arbitrage with small transaction costs
• General financial market model defined by a liquidation value process
• Hedging, arbitrage and optimality with superlinear frictions
• Consistent price systems and arbitrage opportunities of~the~second kind in models with transaction costs
• NO MARGINAL ARBITRAGE OF THE SECOND KIND FOR HIGH PRODUCTION REGIMES IN DISCRETE TIME PRODUCTION–INVESTMENT MODELS WITH PROPORTIONAL TRANSACTION COSTS

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