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No-arbitrage Condition (no-arbitrage + condition)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

No-arbitrage condition and existence of equilibrium in asset markets with a continuum of traders

INTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 1 2005
Cuong Le Van
C62 In the present paper, we prove that a no-arbitrage condition (ŕ la Werner) is necessary and sufficient for the existence of an equilibrium with a continuum of traders and a finite number of assets. As in Aumann (1966), Hildenbrand (1974) and Schmeidler (1969), preferences are not assumed to be convex. We do not use Fatou's Lemma and do not assume that the consumption sets are compact. [source]

Pricing of Forward and Futures Contracts

JOURNAL OF ECONOMIC SURVEYS, Issue 2 2000
Ying-Foon Chow
There has long been substantial interest in understanding the relative pricing of forward and futures contracts. This has led to the development of two standard theories of forward and futures pricing, namely, the Cost-of-Carry and the Risk Premium (or Unbiased Expectations) hypotheses. These studies have modelled the relationship between spot and forward/futures prices either through a no-arbitrage condition or a general equilibrium setting. Relatively few studies in this area have considered the impact of stochastic trends in the data. With the emergence of non-stationarity and cointegration in recent years, more sophisticated models of futures/forward prices have been specified. This paper surveys the significant contributions made to the literature on the pricing of forward/futures contracts, and examines recent empirical studies pertaining to the estimation and testing of univariate and systems models of futures pricing. [source]

The Fundamental Theorem of Asset Pricing under Proportional Transaction Costs in Finite Discrete Time

MATHEMATICAL FINANCE, Issue 1 2004
Walter SchachermayerArticle first published online: 24 DEC 200
We prove a version of the Fundamental Theorem of Asset Pricing, which applies to Kabanov's modeling of foreign exchange markets under transaction costs. The financial market is described by a d×d matrix-valued stochastic process (,t)Tt=0 specifying the mutual bid and ask prices between d assets. We introduce the notion of "robust no arbitrage," which is a version of the no-arbitrage concept, robust with respect to small changes of the bid-ask spreads of (,t)Tt=0. The main theorem states that the bid-ask process (,t)Tt=0 satisfies the robust no-arbitrage condition iff it admits a strictly consistent pricing system. This result extends the theorems of Harrison-Pliska and Kabanov-Stricker pertaining to the case of finite ,, as well as the theorem of Dalang, Morton, and Willinger and Kabanov, Rásonyi, and Stricker, pertaining to the case of general ,. An example of a 5 × 5 -dimensional process (,t)2t=0 shows that, in this theorem, the robust no-arbitrage condition cannot be replaced by the so-called strict no-arbitrage condition, thus answering negatively a question raised by Kabanov, Rásonyi, and Stricker. [source]

No Arbitrage in Discrete Time Under Portfolio Constraints

MATHEMATICAL FINANCE, Issue 3 2001
Laurence Carassus
In frictionless securities markets, the characterization of the no-arbitrage condition by the existence of equivalent martingale measures in discrete time is known as the fundamental theorem of asset pricing. In the presence of convex constraints on the trading strategies, we extend this theorem under a closedness condition and a nondegeneracy assumption. We then provide connections with the superreplication problem solved in Föllmer and Kramkov (1997). [source]