Sticky continuous processes have consistent price systems

Christian Bender (), Mikko S. Pakkanen () and Hasanjen Sayit ()
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Christian Bender: Saarland University, Postal: Department of Mathematics, Saarland University, Postfach 151150, D-66041 Saarbrücken, Germany
Mikko S. Pakkanen: Aarhus University and CREATES, Postal: Department of Economics and Business, Fuglesangs Allé 4, 8210 Aarhus V, Denmark
Hasanjen Sayit: Durham University, Postal: Department of Mathematical Sciences, Durham University, South Road, Durham DH1 3LE, UK

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi-asset price process has a consistent price system, under arbitrarily small proportional transaction costs, if it satisfies a natural multi-dimensional generalization of the stickiness condition introduced by Guasoni

Keywords: Consistent price system; stickiness; martingale; arbitrage; transaction costs (search for similar items in EconPapers)
JEL-codes: D23 G10 G12 (search for similar items in EconPapers)
Pages: 10
Date: 2013-08-11
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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