No-arbitrage criteria for financial markets with efficient friction

We consider a multi-asset discrete-time model of a financial market with proportional transaction costs and efficient friction and prove necessary and sufficient conditions for the absence of arbitrage. Our main result is an extension of the Dalang-Morton-Willinger theorem. As an application, we est...

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Published in:Finance and stochastics 2002-07, Vol.6 (3), p.371-382
Main Authors: Kabanov, Yuri, R sonyi, Mikl s, Stricker, Christophe
Format: Article
Language:English
Subjects:
Arbitrage
Friction
Hedging
Random variables
Securities markets
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R sonyi, Mikl s
Stricker, Christophe
description We consider a multi-asset discrete-time model of a financial market with proportional transaction costs and efficient friction and prove necessary and sufficient conditions for the absence of arbitrage. Our main result is an extension of the Dalang-Morton-Willinger theorem. As an application, we establish a hedging theorem giving a description of the set of initial endowments which allows to super-replicate a given contingent claim.
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source EconLit s plnými texty; International Bibliography of the Social Sciences (IBSS); Business Source Ultimate【Trial: -2024/12/31】【Remote access available】; ABI/INFORM global; Springer Nature
subjects Arbitrage
Friction
Hedging
Random variables
Securities markets
title No-arbitrage criteria for financial markets with efficient friction
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