Infinitely many securities and the fundamental theorem of asset pricing

Alejandro Balbás and Anna Downarowicz

DEE - Working Papers. Business Economics. WB from Universidad Carlos III de Madrid. Departamento de Economía de la Empresa

Abstract: Several authors have pointed out the possible absence of martingale measures for static arbitrage-free markets with an infinite number of available securities. This paper addresses this caveat by drawing on projective systems of probability measures. Firstly, it is shown that there are two distinct sorts of models whose treatment is necessarily different. Secondly, and more important, we analyze those situations for which one can provide a projective system of ó .additive measures whose projective limit may be interpreted as a risk-neutral probability. Hence, the Fundamental Theorem of Asset Pricing is extended so that it can apply for models with infinitely many assets.

Date: 2004-08
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Persistent link: https://EconPapers.repec.org/RePEc:cte:wbrepe:wb043513

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