On the completeness of a constrained market

Erio Castagnoli and Gino Favero

International Journal of Applied Management Science, 2008, vol. 1, issue 1, 90-96

Abstract: We show how the well-known Farkas Lemma, commonly used to characterise absence of arbitrages in perfect markets, is also exploitable to ascertain the completeness of a market with total short sales constraints. The generalisation of this lemma to convex cones also allows to characterise the completeness of a market with general conic constraints on investment strategies. Such results can be also applied to tell whether it is possible to hedge perfectly any risky position with a given set of tools.

Keywords: market completeness; short-sale constraints; Farkas Lemma; constrained markets; investment strategies; hedging. (search for similar items in EconPapers)
Date: 2008
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