Sticky Continuous Processes have Consistent Price Systems

DOI10.1239/JAP/1437658617MaRDI QIDQ2949856zbMATH OpenOpenAlexFDO

Authors Christian Bender, Mikko S. Pakkanen, Hasanjan Sayit

Publication date 2 October 2015

Published in Journal of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1310.7857, https://projecteuclid.org/euclid.jap/1437658617

zbMATH Keywords

arbitrageconsistent price systemmartingalestickinesstransaction costs

Mathematics Subject Classification ID

Martingales with continuous parameter (60G44) Financial applications of other theories (91G80)

Abstract: Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi-asset price process has a consistent price system, under arbitrarily small proportional transaction costs, if it satisfies a natural multi-dimensional generalization of the stickiness condition introduced by Guasoni [Math. Finance 16(3), 569-582 (2006)].

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Cited in

(9)

• Sticky processes, local and true martingales
• No arbitrage and lead-lag relationships
• Consistent price systems and face-lifting pricing under transaction costs
• Consistent price systems for bounded processes
• On the stickiness property
• Short communication: A note on utility maximization with proportional transaction costs and stability of optimal portfolios
• On the existence of consistent price systems
• Consistent price systems for subfiltrations
• On the fractional stochastic integration for random non-smooth integrands

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