On the semimartingale property of discounted asset-price processes

DOI10.1016/J.SPA.2011.06.010MaRDI QIDQ719780zbMATH OpenOpenAlexFDO

Authors Constantinos Kardaras, Eckhard Platen

Publication date 11 October 2011

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/0803.1890

zbMATH Keywords

arbitrage of the first kindsemimartingalessupermartingale deflatorsbuy-and-hold strategiesno-short-sales constraintsnuméraire portfolio

Mathematics Subject Classification ID

Portfolio theory (91G10) Applications of functional analysis in optimization, convex analysis, mathematical programming, economics (46N10) General theory of stochastic processes (60G07)

Abstract: A financial market model where agents trade using realistic combinations of buy-and-hold strategies is considered. Minimal assumptions are made on the discounted asset-price process - in particular, the semimartingale property is not assumed. Via a natural market viability assumption, namely, absence of arbitrages of the first kind, we establish that discounted asset-prices have to be semimartingales. In a slightly more specialized case, we extend the previous result in a weakened version of the Fundamental Theorem of Asset Pricing that involves strictly positive supermartingale deflators rather than Equivalent Martingale Measures.

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Cited in

(24)

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• Stochastic integration with respect to arbitrary collections of continuous semimartingales and applications to mathematical finance
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• On the closure in the emery topology of semimartingale wealth-process sets
• Portfolio optimization under shortfall risk constraint
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• Exploiting arbitrage requires short selling
• On the semimartingale property via bounded logarithmic utility
• Remarks on simple arbitrage on markets with bid and ask prices
• Change of measure up to a random time: details

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