The fundamental theorem of asset pricing with cone constraints

Huyên Pham; Nizar Touzi

doi:10.1016/S0304-4068(97)00059-1

The fundamental theorem of asset pricing with cone constraints

Huyên Pham, Nizar Touzi

Finance and Risk Engineering

Research output: Contribution to journal › Article › peer-review

Abstract

In frictionless securities markets, the characterization of the no arbitrage condition by the existence of equivalent martingale measures in discrete time is known as the fundamental Theorem of asset pricing. In the presence of cone constraints on the trading strategies, we extend the fundamental theorem of asset pricing under a nondegeneracy assumption. We also prove a one-period version of this theorem when there are transaction costs.

Original language	English (US)
Pages (from-to)	265-279
Number of pages	15
Journal	Journal of Mathematical Economics
Volume	31
Issue number	2
DOIs	https://doi.org/10.1016/S0304-4068(97)00059-1
State	Published - Mar 1999

Keywords

C60
G19
No arbitrage
No free lunch
Portfolio constraints
Transaction costs

ASJC Scopus subject areas

Economics and Econometrics
Applied Mathematics

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10.1016/S0304-4068(97)00059-1

Cite this

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AB - In frictionless securities markets, the characterization of the no arbitrage condition by the existence of equivalent martingale measures in discrete time is known as the fundamental Theorem of asset pricing. In the presence of cone constraints on the trading strategies, we extend the fundamental theorem of asset pricing under a nondegeneracy assumption. We also prove a one-period version of this theorem when there are transaction costs.

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KW - No arbitrage

KW - No free lunch

KW - Portfolio constraints

KW - Transaction costs

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The fundamental theorem of asset pricing with cone constraints

Abstract

Keywords

ASJC Scopus subject areas

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