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
TypeArticle accepté pour publication ou publié
External document linkhttp://hal.archives-ouvertes.fr/hal-00700844
Journal nameFinance and Stochastics
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Abstract (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 / KeywordsArbitrage; Fundamental Theorem of Asset Pricing; Transaction Costs; Admissible Strategies; Finite Variation
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Robust no-free lunch with vanishing risk, a continuum of assets and proportional transaction costs Taflin, Erik; Lépinette, Emmanuel; Bouchard, Bruno (2014) Article accepté pour publication ou publié