Prospective strict no-arbitrage and the fundamental theorem of asset pricing under transaction costs

DOI10.1007/S00780-019-00403-5zbMATH Open1444.91216arXiv1811.11621OpenAlexW3101633199WikidataQ127290339 ScholiaQ127290339MaRDI QIDQ2274232FDOQ2274232

Christoph Kühn, Alexander Molitor

Publication date: 19 September 2019

Published in: Finance and Stochastics (Search for Journal in Brave)

Abstract: In discrete time markets with proportional transaction costs, Schachermayer (2004) shows that robust no-arbitrage is equivalent to the existence of a strictly consistent price system. In this paper, we introduce the concept of prospective strict no-arbitrage that is a variant of the strict no-arbitrage property from Kabanov, R'asonyi, and Stricker (2002). The prospective strict no-arbitrage condition is slightly weaker than robust no-arbitrage, and it implies that the set of portfolios attainable from zero initial endowment is closed in probability. A weak version of prospective strict no-arbitrage turns out to be equivalent to the existence of a consistent price system. In contrast to the fundamental theorem of asset pricing of Schachermayer (2004), the consistent frictionless prices may lie on the boundary of the bid-ask spread. On the technical level, a crucial difference to Schachermayer (2004) and Kabanov-R'asonyi-Stricker (2003) is that we prove closedness without having at hand that the null-strategies form a linear space.

Full work available at URL: https://arxiv.org/abs/1811.11621

zbMATH Keywords

fundamental theorem of asset pricingproportional transaction costsarbitrage

Mathematics Subject Classification ID

Financial markets (91G15) Interest rates, asset pricing, etc. (stochastic models) (91G30)

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Cited In (7)

• On the quasi-sure superhedging duality with frictions
• Title not available (Why is that?)
• NO MARGINAL ARBITRAGE OF THE SECOND KIND FOR HIGH PRODUCTION REGIMES IN DISCRETE TIME PRODUCTION–INVESTMENT MODELS WITH PROPORTIONAL TRANSACTION COSTS
• Title not available (Why is that?)
• MODEL-FREE WEAK NO-ARBITRAGE AND SUPERHEDGING UNDER TRANSACTION COSTS BEYOND EFFICIENT FRICTION
• On the closedness of sums of convex cones in \(L^0\) and the robust no-arbitrage property
• Dynamic Arbitrage-Free Asset Pricing with Proportional Transaction Costs

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