The fundamental theorem of asset pricing under transaction costs
Guasoni, Paolo; Lépinette, Emmanuel; Rásonyi, Miklós (2012), The fundamental theorem of asset pricing under transaction costs, Finance and Stochastics, 16, 4, p. 741-777. http://dx.doi.org/10.1007/s00780-012-0185-0
Type
Article accepté pour publication ou publiéExternal document link
http://hal.archives-ouvertes.fr/hal-00700844Date
2012Journal name
Finance and StochasticsVolume
16Number
4Publisher
Springer
Pages
741-777
Publication identifier
Metadata
Show full item recordAbstract (EN)
This paper proves the fundamental theorem of asset pricing with transaction costs, when bid and ask prices follow locally bounded càdlàg (right-continuous, left-limited) processes. The robust no free lunch with vanishing risk condition (RNFLVR) for simple strategies is equivalent to the existence of a strictly consistent price system (SCPS). This result relies on a new notion of admissibility, which reflects future liquidation opportunities. The RNFLVR condition implies that admissible strategies are predictable processes of finite variation. The Appendix develops an extension of the familiar Stieltjes integral for càdlàg integrands and finite-variation integrators, which is central to modelling transaction costs with discontinuous prices.Subjects / Keywords
Arbitrage; Fundamental Theorem of Asset Pricing; Transaction Costs; Admissible Strategies; Finite VariationRelated items
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