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Robust No Arbitrage Condition for Continuous-Time Models with Transaction Costs

Lépinette, Emmanuel (2011), Robust No Arbitrage Condition for Continuous-Time Models with Transaction Costs, in Kijima‎, Masaaki, Recent Advances In Financial Engineering 2010, WORLD SCIENTIFIC, p. 69-82

Type
Communication / Conférence
Date
2011
Conference title
Kier-Tmu International Workshop On Financial Engineering 2010
Conference date
2010-08
Conference city
Tokyo
Conference country
Japon
Book title
Recent Advances In Financial Engineering 2010
Book author
Kijima‎, Masaaki
Publisher
WORLD SCIENTIFIC
ISBN
978-6-613-43406-7
Number of pages
260
Pages
69-82
Metadata
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Author(s)
Lépinette, Emmanuel
Abstract (EN)
We extend the Robust No Free Lunch (RNFL) theorem formulated for discrete-time models with proportional transaction costs to general continuous-time settings. We prove that the (RNFL) condition is equivalent to the existence of a strictly consistent price system, i.e. a martingale evolving in the interior of the solvency cone of all portfolio positions which can be changed into positive ones paying transaction costs.
Subjects / Keywords
Transaction costs; Arbitrage; No Free Lunch; Consistent price systems; Set-valued processes; Martingales
JEL
D23 - Organizational Behavior; Transaction Costs; Property Rights