A new perspective on the fundamental theorem of asset pricing for large financial markets

DOI10.1137/S0040585X97T987879MaRDI QIDQ3178725zbMATH OpenFDO

Authors Christa Cuchiero, Irene Klein, Josef Teichmann

Publication date 7 December 2016

Published in Theory of Probability & Its Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1412.7562

zbMATH Keywords

fundamental theorem of asset pricingEmery topologylarge financial marketsno free lunch with vanishing risk (NFLVR) conditionpredictable uniform tightness (P-UT) property

Mathematics Subject Classification ID

Generalizations of martingales (60G48) Microeconomic theory (price theory and economic markets) (91B24) Actuarial science and mathematical finance (91G99)

Abstract: In the context of large financial markets we formulate the notion of emph{no asymptotic free lunch with vanishing risk} (NAFLVR), under which we can prove a version of the fundamental theorem of asset pricing (FTAP) in markets with an (even uncountably) infinite number of assets, as it is for instance the case in bond markets. We work in the general setting of admissible portfolio wealth processes as laid down by Y. Kabanov cite{kab:97} under a substantially relaxed concatenation property and adapt the FTAP proof variant obtained in cite{CT:14} for the classical small market situation to large financial markets. In the case of countably many assets, our setting includes the large financial market model considered by M. De Donno et al. cite{DGP:05} and its abstract integration theory. The notion of (NAFLVR) turns out to be an economically meaningful "no arbitrage" condition (in particular not involving weak-$\ast$-closures), and, (NAFLVR) is equivalent to the existence of a separating measure. Furthermore we show -- by means of a counterexample -- that the existence of an equivalent separating measure does not lead to an equivalent $sigma$-martingale measure, even in a countable large financial market situation.

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Cited in

(29)

• Stochastic integration with respect to arbitrary collections of continuous semimartingales and applications to mathematical finance
• Large Platonic markets with delays
• Characterisation of \(L^0\)-boundedness for a general set of processes with no strictly positive element
• Yan theorem in \(L^{\infty}\) with applications to asset pricing
• Reproducing kernel Hilbert space based on special integrable semimartingales and stochastic integration
• Term structure modeling under volatility uncertainty
• A general HJM framework for multiple yield curve modelling
• No asymptotic free lunch reviewed in the light of Orlicz spaces
• Risk-neutral pricing for arbitrage pricing theory
• On utility maximization without passing by the dual problem
• Term structure modeling with overnight rates beyond stochastic continuity
• General dynamic term structures under default risk
• Market free lunch and large financial markets
• Rational models for inflation-linked derivatives
• DEFAULTABLE TERM STRUCTURES DRIVEN BY SEMIMARTINGALES
• Maximizing expected utility in the arbitrage pricing model
• Term structure modelling for multiple curves with stochastic discontinuities
• A generalized intensity-based framework for single-name credit risk
• A fundamental theorem of asset pricing for continuous time large financial markets in a two filtration setting
• General analysis of long-term interest rates
• Approximation of forward curve models in commodity markets with arbitrage-free finite-dimensional models
• Large Financial Markets, Discounting, and No Asymptotic Arbitrage
• No arbitrage of the first kind and local martingale numéraires
• scientific article; zbMATH DE number 1240555 (Why is no real title available?)
• A fundamental theorem of asset pricing for large financial markets.
• Regime switching affine processes with applications to finance
• Exponentially concave functions and high dimensional stochastic portfolio theory
• Pricing of contingent claims in large markets
• From small markets to big markets

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