Market Viability and Completeness for Multinomial Models

Nahuel I. Arca

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Abstract: We study a generalization of the classical binomial model that consists in allowing any finite number of branches in each node of the tree representation. In this model, we show that the two fundamental theorems of asset pricing have a geometric interpretation and, using this, we give necessary and sufficient conditions for a market to be arbitrage-free and complete. We also present an algorithm for completing arbitrage-free markets in every possible way. We apply these results to the study of a discrete-time version of the Korn-Kreer-Lenssen model.

Date: 2025-08
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