Martingale Measures For A Class of Right-Continuous Processes
AbstractThe subject of the present paper is the following. Suppose that "W" is a class of adapted, right-continuous processes on the continuous time horizon [0, 1], and for every stopping time and "W", () is bounded below. A necessary and sufficient condition will be given for the existence of a probability measure "Q" which is equivalent to the original measure and such that each process in "W" is a martingale under "Q". If the processes in "W" represent the discounted prices of available securities, then the condition given here for the existence of a martingale measure can be interpreted as absence of "free lunch" in the securities market. This is a familiar kind of theorem from the finance literature; the novelty of this paper is that the security prices are not required to be in "LP" for some 1 "p", nor are they assumed to be continuous. Also, the concept of free lunch is invariant under the substitution of the original probability measure by an equivalent probability measure. the assumption that () is bounded below for every "W" and stopping time is quite natural since prices are nonnegative. Copyright 1993 Blackwell Publishers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Mathematical Finance.
Volume (Year): 3 (1993)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0960-1627
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- A. Fiori Maccioni, 2011. "The risk neutral valuation paradox," Working Paper CRENoS 201112, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- Napp, Clotilde, 2001. "Pricing issues with investment flows Applications to market models with frictions," Journal of Mathematical Economics, Elsevier, vol. 35(3), pages 383-408, June.
- Dilip B. Madan & Frank Milne, 1994.
"Contingent Claims Valued And Hedged By Pricing And Investing In A Basis,"
Wiley Blackwell, vol. 4(3), pages 223-245.
- Frank Milne & Dilip Madan, 1994. "Contingent Claims Valued And Hedged By Pricing And Investing In A Basis," Working Papers 1158, Queen's University, Department of Economics.
- Clotilde Napp & Elyès Jouini, 2005.
"Arbitrage and state price deflators in a general intertemporal framework,"
- Jouini, Elyes & Napp, Clotilde & Schachermayer, Walter, 2005. "Arbitrage and state price deflators in a general intertemporal framework," Journal of Mathematical Economics, Elsevier, vol. 41(6), pages 722-734, September.
- Frittelli, Marco, 1996. "Dominated families of martingale, supermartingale and quasimartingale laws," Stochastic Processes and their Applications, Elsevier, vol. 63(2), pages 265-277, November.
- Jaime A. Londo\~no, 2003. "State Tameness: A New Approach for Credit Constrains," Papers math/0305274, arXiv.org, revised Feb 2004.
- Jouini, Elyès, 2001. "Arbitrage and control problems in finance: A presentation," Economics Papers from University Paris Dauphine 123456789/5590, Paris Dauphine University.
- Alessandro Fiori Maccioni, 2011. "Endogenous Bubbles in Derivatives Markets: The Risk Neutral Valuation Paradox," Papers 1106.5274, arXiv.org, revised Sep 2011.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.