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

DOI10.1080/17442508.2014.895358zbMATH Open1337.91153arXiv1311.7027OpenAlexW2071244694MaRDI QIDQ2811116FDOQ2811116

Claudio Fontana

Publication date: 10 June 2016

Published in: Stochastics (Search for Journal in Brave)

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.

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

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zbMATH Keywords

fundamental theorem of asset pricingmartingale deflatorarbitragecomplete market[https://portal.mardi4nfdi.de/w/index.php?title=+Special%3ASearch&search=It%EF%BF%BD%EF%BF%BD-process&go=Go It��-process]equivalent local martingale measure

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)

Cites Work

• The fundamental theorem of asset pricing for unbounded stochastic processes
• A general version of the fundamental theorem of asset pricing
• Mathematical methods for financial markets.
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• Martingale and Duality Methods for Utility Maximization in an Incomplete Market
• Arbitrage possibilities in Bessel processes and their relations to local martingales
• The Economic Plausibility of Strict Local Martingales in Financial Modelling
• WEAK AND STRONG NO-ARBITRAGE CONDITIONS FOR CONTINUOUS FINANCIAL MARKETS
• The two fundamental theorems of asset pricing for a class of continuous-time financial markets
• Diffusion-Based Models for Financial Markets Without Martingale Measures
• A necessary and sufficient condition for absence of arbitrage with tame portfolios
• NO-FREE-LUNCH EQUIVALENCES FOR EXPONENTIAL LÉVY MODELS UNDER CONVEX CONSTRAINTS ON INVESTMENT

Cited In (7)

• Title not available (Why is that?)
• A NOTE ON ARBITRAGE AND CLOSED CONVEX CONES
• Title not available (Why is that?)
• Arbitrage approximation theory
• Title not available (Why is that?)
• A direct proof of the Bichteler-Dellacherie theorem and connections to arbitrage
• A note on arbitrage in term structure

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