Harnack inequality and no-arbitrage bounds for self-financing portfolios

Alessandro Carciola, Andrea Pascucci and Sergio Polidoro

MPRA Paper from University Library of Munich, Germany

Abstract: We give a direct proof of the Harnack inequality for a class of Kolmogorov operators associated with a linear SDE and we find the explicit expression of the optimal Harnack constant. We discuss some possible implication of the Harnack inequality in finance: specifically we infer no-arbitrage bounds for the value of self-financing portfolios in terms of the initial wealth.

Keywords: Harnack inequality; no-arbitrage principle; self-financing portfolio; Kolmogorov equation; linear stochastic equation (search for similar items in EconPapers)
JEL-codes: C02 C65 G1 (search for similar items in EconPapers)
Date: 2009-06-10
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Citations: View citations in EconPapers (1)

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