Viability and arbitrage under Knightian Uncertainty

Matteo Burzoni, Frank Riedel and Halil Mete Soner
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Matteo Burzoni: Center for Mathematical Economics, Bielefeld University
Halil Mete Soner: Center for Mathematical Economics, Bielefeld University

No 575, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: We reconsider the microeconomic foundations of financial economics under Knightian Uncertainty. In a general framework, we discuss the absence of arbitrage, its relation to economic viability, and the existence of suitable nonlinear pricing ex- pectations. Classical financial markets under risk and no ambiguity are contained as special cases, including various forms of the Efficient Market Hypothesis. For Knightian uncertainty, our approach unifies recent versions of the Fundamental Theorem of Asset Pricing under a common framework.

Keywords: Robust Finance; No Arbitrage; Viability; Knightian Uncertainty (search for similar items in EconPapers)
Pages: 46
Date: 2017-07-24
New Economics Papers: this item is included in nep-hpe and nep-mic
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Citations: View citations in EconPapers (8)

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https://pub.uni-bielefeld.de/download/2912963/2912968 First Version, 2017 (application/pdf)

Related works:
Journal Article: Viability and Arbitrage Under Knightian Uncertainty (2021)
Working Paper: Viability and Arbitrage under Knightian Uncertainty (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:575

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