Sticky continuous processes have consistent price systems

Christian Bender, Mikko S. Pakkanen and Hasanjan Sayit

Papers from arXiv.org

Abstract: Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi-asset price process has a consistent price system, under arbitrarily small proportional transaction costs, if it satisfies a natural multi-dimensional generalization of the stickiness condition introduced by Guasoni [Math. Finance 16(3), 569-582 (2006)].

Date: 2013-10, Revised 2014-08
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Published in Journal of Applied Probability 2015, Vol. 52, No. 2, 586-594

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