Consistent Price Systems in Multiasset Markets

Florian Maris and Hasanjan Sayit

International Journal of Stochastic Analysis, 2012, vol. 2012, 1-14

Abstract:

Let 𠑋 𠑡 be any d -dimensional continuous process that takes values in an open connected domain 𠒪 in ℠𠑑 . In this paper, we give equivalent formulations of the conditional full support (CFS) property of 𠑋 𠑡 in 𠒪 . We use them to show that the CFS property of X in 𠒪 implies the existence of a martingale M under an equivalent probability measure such that M lies in the 𠜖 > 0 neighborhood of 𠑋 𠑡 for any given 𠜖 under the supremum norm. The existence of such martingales, which are called consistent price systems (CPSs), has relevance with absence of arbitrage and hedging problems in markets with proportional transaction costs as discussed in the recent paper by Guasoni et al. (2008), where the CFS property is introduced and shown sufficient for CPSs for processes with certain state space. The current paper extends the results in the work of Guasoni et al. (2008), to processes with more general state space.

Date: 2012
References: Add references at CitEc
Citations:

Downloads: (external link)
http://downloads.hindawi.com/journals/IJSA/2012/687376.pdf (application/pdf)
http://downloads.hindawi.com/journals/IJSA/2012/687376.xml (text/xml)

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:hin:jnijsa:687376

DOI: 10.1155/2012/687376

Access Statistics for this article

More articles in International Journal of Stochastic Analysis from Hindawi
Bibliographic data for series maintained by Mohamed Abdelhakeem ().