- A COMPUTATIONAL APPROACH TO THE FUNDAMENTAL THEOREM OF ASSET PRICING IN A SINGLE-PERIOD MARKET

Antonio Falcó, Antonio Rubia, F. Acedo, Francis Benito and J. Torres
Additional contact information
Antonio Falcó: Universidad Cardenal Herrera
Antonio Rubia: Universidad de Alicante
F. Acedo: Universidad de Alicante
Francis Benito: Universidad de Alicante
J. Torres: Universidad CEU San Pablo

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: In this paper we provide a new approach to the Fundamental Theorem of As-set Pricing. The proofof this result is usually based on Projection (Separation) Theorems and is far more intuitive. Ourapproach follow the relation between the projection problem an equivalent least squares problem.More precisely, we will use and iterative procedure in order to obtain solutions of a bounded leastsquare problem. This solutions will give, under some conditions, either the state price vector orthe arbitrage opportunity of the problem under consideration.

Keywords: Asset Pricing; Arbitrage; Mathematical Finance (search for similar items in EconPapers)
Pages: 15 pages
Date: 1999-12
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http://www.ivie.es/downloads/docs/wpasad/wpasad-1999-29.pdf Fisrt version / Primera version, 1999 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:1999-29

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