Fundamental theorems of asset pricing for piecewise semimartingales of stochastic dimension

DOI10.1007/S00780-014-0230-2MaRDI QIDQ457178zbMATH OpenOpenAlexFDO

Authors Winslow Strong

Publication date 26 September 2014

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

Full work available at URL https://arxiv.org/abs/1112.5340, http://hdl.handle.net/20.500.11850/88121

zbMATH Keywords

semimartingalesasset pricingstochastic integrationstochastic dimension

Mathematics Subject Classification ID

Generalizations of martingales (60G48) Stochastic integrals (60H05) Financial applications of other theories (91G80)

Abstract: The purpose of this paper is two-fold. First is to extend the notions of an n-dimensional semimartingale and its stochastic integral to a piecewise semimartingale of stochastic dimension. The properties of the former carry over largely intact to the latter, avoiding some of the pitfalls of infinite-dimensional stochastic integration. Second is to extend two fundamental theorems of asset pricing (FTAPs): the equivalence of no free lunch with vanishing risk to the existence of an equivalent sigma-martingale measure for the price process, and the equivalence of no arbitrage of the first kind to the existence of an equivalent local martingale deflator for the set of nonnegative wealth processes.

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Cited in

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• The two fundamental theorems of asset pricing for a class of continuous-time financial markets
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• Trading strategies generated pathwise by functions of market weights
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• UTILITY MAXIMIZATION IN A LARGE MARKET
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• Quantifying dimensional change in stochastic portfolio theory
• Finitely Additive Probabilities and the Fundamental Theorem of Asset Pricing
• Large Financial Markets, Discounting, and No Asymptotic Arbitrage

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