EconPapers    
Economics at your fingertips  
 

Fundamental Theorem of Asset Pricing Under Transaction Costs and Model Uncertainty

Erhan Bayraktar and Yuchong Zhang ()
Additional contact information
Yuchong Zhang: Department of Statistics, Columbia University, New York, New York 10027

Mathematics of Operations Research, 2016, vol. 41, issue 3, 1039-1054

Abstract: We prove the fundamental theorem of asset pricing for a discrete time financial market where trading is subject to proportional transaction costs and the asset price dynamic is modeled by a family of probability measures, possibly nondominated. Using a backward-forward scheme, we show that when the market consists of a money market account and a single stock, no-arbitrage in a quasi-sure sense is equivalent to the existence of a suitable family of consistent price systems. We also show that when the market consists of multiple dynamically traded assets and satisfies efficient friction , strict no-arbitrage in a quasi-sure sense is equivalent to the existence of a suitable family of strictly consistent price systems.

Keywords: transaction costs; nondominated collection of probability measures; fundamental theorem of asset pricing; martingale selection problem (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1287/moor.2015.0767 (application/pdf)

Related works:
Working Paper: Fundamental Theorem of Asset Pricing under Transaction costs and Model uncertainty (2015) Downloads
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:inm:ormoor:v:41:y:2016:i:3:p:1039-1054

Access Statistics for this article

More articles in Mathematics of Operations Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Matthew Walls ().

 
Page updated 2019-09-19
Handle: RePEc:inm:ormoor:v:41:y:2016:i:3:p:1039-1054