On the law of one price

Jean-Michel Courtault (), Freddy Delbaen (), Yuri Kabanov () and Christophe Stricker ()
Authors registered in the RePEc Author Service: Юрий Михайлович Кабанов

Finance and Stochastics, 2004, vol. 8, issue 4, 525-530

Abstract: We consider the standard discrete-time model of a frictionless financial market and show that the law of one price holds if and only if there exists a martingale density process with strictly positive initial value. In contrast to the classical no-arbitrage criteria, this density process may change its sign. We also give an application to the CAPM. Copyright Springer-Verlag Berlin/Heidelberg 2004

Keywords: Law of one price; Harrison-Pliska theorem; Dalang-Morton-Willinger theorem; market portfolio; CAPM (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1007/s00780-004-0124-9

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