Nonequilibrium Geometric No-Arbitrage Principle and Asset Pricing Theorem

Wanxiao Tang, Peibiao Zhao and Luca Pancioni

Discrete Dynamics in Nature and Society, 2023, vol. 2023, 1-11

Abstract: We find a novel and intimate correspondence in the present paper between the martingale and one-parameter transformation group and develop a nonequilibrium geometric no-arbitrage principle to a frictional financial market via this correspondence. Further, we achieve a fundamental pricing theorem via a geometric pricing transform (generator). Finally, we derive that the nonequilibrium geometric no-arbitrage is equivalent to NFLVR in a frictionless financial market. In addition, we apply the nonequilibrium geometric no-arbitrage condition to a frictional financial market. At the end of this paper, a numerical example confirms the effectiveness of the nonequilibrium geometric no-arbitrage condition.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnddns:9077099

DOI: 10.1155/2023/9077099

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