No free lunch for markets with multiple numéraires

Laurence Carassus

Journal of Mathematical Economics, 2023, vol. 104, issue C

Abstract: We consider a new framework, that of a global market with a finite number of submarkets, where there is a tradable numéraire for each submarket, but no tradable numéraire for the global market. Under a global no arbitrage condition, we show the existence of a common density from which equivalent (local) martingale measures are constructed for each submarket. We also introduce several superreplication prices, depending on the chosen type of hedging: on the global market, on a given submarket or on all submarkets separably. We prove duality results on these prices that allow to assess differences in characteristics between the submarkets, such as liquidity or credit quality. The results are applied in concrete situations, in particular in a Brownian setup.

Keywords: Multiple numéraires; No free lunch; Martingale measure; Superreplication price; Illiquidity; Multicurve model (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304406822001318
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:104:y:2023:i:c:s0304406822001318

DOI: 10.1016/j.jmateco.2022.102805

Access Statistics for this article

Journal of Mathematical Economics is currently edited by Atsushi (A.) Kajii

More articles in Journal of Mathematical Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().