A note on arbitrage, approximate arbitrage and the fundamental theorem of asset pricing

DOI10.1080/17442508.2014.895358MaRDI QIDQ2811116zbMATHOpenAlexFDO

Authors Claudio Fontana

Publication date 10 June 2016

Published in Stochastics (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1311.7027

zbMATH Keywords

fundamental theorem of asset pricingmartingale deflatorarbitragecomplete marketequivalent local martingale measureItô-process

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Stochastic integrals (60H05) Applications of stochastic analysis (to PDEs, etc.) (60H30) Financial applications of other theories (91G80)

Abstract: We provide a critical analysis of the proof of the fundamental theorem of asset pricing given in the paper "Arbitrage and approximate arbitrage: the fundamental theorem of asset pricing" by B. Wong and C.C. Heyde (Stochastics, 2010) in the context of incomplete It^o-process models. We show that their approach can only work in the known case of a complete financial market model and give an explicit counterexample.

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Cites work

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Cited in

(9)

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• A note on arbitrage in term structure
• A direct proof of the Bichteler-Dellacherie theorem and connections to arbitrage
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