Option spanning beyond $L_p$-models

Niushan Gao and Foivos Xanthos

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Abstract: \begin{abstract} The aim of this paper is to study the spanning power of options in a static financial market that allows non-integrable assets. Our findings extend and unify the results in [8,9,18] for $L_p$-models. We also apply the spanning power properties to the pricing problem. In particular, we show that prices on call and put options of a limited liability asset can be uniquely extended by arbitrage to all marketed contingent claims written on the asset.

Date: 2016-03, Revised 2016-09
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1603.01288

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