Arbitrage in markets with bid-ask spreads

Przemys{\l}aw Rola

Papers from arXiv.org

Abstract: In this paper a finite discrete time market with an arbitrary state space and bid-ask spreads is considered. The notion of an equivalent bid-ask martingale measure (EBAMM) is introduced and the fundamental theorem of asset pricing is proved using (EBAMM) as an equivalent condition for no-arbitrage. The Cox-Ross-Rubinstein model with bid-ask spreads is presented as an application of our results.

Date: 2014-07
New Economics Papers: this item is included in nep-mst
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