Complete markets do not allow free cash flow streams

Nicole Bäuerle () and Stefanie Grether ()

Mathematical Methods of Operations Research, 2015, vol. 81, issue 2, 137-146

Abstract: In this short note we prove a conjecture posed in Cui et al. (Math Finance 22:346–378, 2012 ): Dynamic mean–variance problems in arbitrage-free, complete financial markets do not allow free cash flows. Moreover, we show by investigating a benchmark problem that this effect is due to the performance criterion and not due to the time inconsistency of the strategy. Copyright Springer-Verlag Berlin Heidelberg 2015

Keywords: Mean–variance problem; Time-inconsistency; Market completeness; Benchmark problem (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (11)

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DOI: 10.1007/s00186-014-0489-2

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