Arbitrage and investment opportunities

Elyès Jouini () and Clotilde Napp

Post-Print from HAL

Abstract: We consider a model in which any investment opportunity is described in terms of cash flows. We don't assume that there is a numéraire, enabling investors to transfer wealth through time; the time horizon is not supposed to be finite and the investment opportunities are not specifically related to the buying and selling of securities on a financial market. In this quite general framework, we show that the assumption of no-arbitrage is essentially equivalent to the existence of a "discount process" under which the "net present value" of any available investment is nonpositive. Since most market imperfections, such as short sale constraints, convex cone constraints, proportional transaction costs, no borrowing or different borrowing and lending rates, etc., can fit in our model for a specific set of investments, we then obtain a characterization of the noarbitrage condition in these imperfect models, from which it is easy to derive pricing formulae for contingent claims.

Keywords: Yan's Theorem; Arbitrage; investment opportunities; numéraire; market frictions; Yan's Theorem. (search for similar items in EconPapers)
Date: 2001-06-01
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00778381v1
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Published in Finance and Stochastics, 2001, 5 (3), pp.305-325

Downloads: (external link)
https://shs.hal.science/halshs-00778381v1/document (application/pdf)

Related works:
Journal Article: Arbitrage and investment opportunities (2001)
Working Paper: Arbitrage and Investment Opportunities (1999)
Working Paper: Arbitrage and Investment Opportunities (1998)
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:hal:journl:halshs-00778381

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().