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Arbitrage And Free Lunch With Bounded Risk For Unbounded Continuous Processes

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  • Freddy Delbaen
  • Walter Schachermayer
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    Abstract

    We give two examples showing that for unbounded continuous price processes, the no-free-lunch assumption and the existence of an equivalent martingale measure are not equivalent. In fact it turns out that the notion of an equivalent local martingale measure is natural in this context. Copyright 1994 Blackwell Publishers.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9965.1994.tb00063.x
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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Mathematical Finance.

    Volume (Year): 4 (1994)
    Issue (Month): 4 ()
    Pages: 343-348

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    Handle: RePEc:bla:mathfi:v:4:y:1994:i:4:p:343-348

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    Cited by:
    1. Elyès Jouini & Hédi Kallal, 1997. "Viability and Equilibrium in Securities Markets with Frictions," Working Papers 97-07, Centre de Recherche en Economie et Statistique.
    2. Erhan Bayraktar & Hasanjan Sayit, 2008. "No Arbitrage Conditions For Simple Trading Strategies," Papers 0801.4047, arXiv.org, revised Jan 2009.
    3. Alexander M. G. Cox & Zhaoxu Hou & Jan Obloj, 2014. "Robust pricing and hedging under trading restrictions and the emergence of local martingale models," Papers 1406.0551, arXiv.org.
    4. Christian Bender, 2012. "Simple arbitrage," Papers 1210.5391, arXiv.org.
    5. Gerber, Hans U. & Shiu, Elias S. W., 1996. "Actuarial bridges to dynamic hedging and option pricing," Insurance: Mathematics and Economics, Elsevier, vol. 18(3), pages 183-218, November.
    6. Christian Zühlsdorff, 2002. "The Pricing of Derivatives on Assets with Quadratic Volatility," Bonn Econ Discussion Papers bgse5_2002, University of Bonn, Germany.
    7. Christian Zuhlsdorff, 2001. "The pricing of derivatives on assets with quadratic volatility," Applied Mathematical Finance, Taylor & Francis Journals, vol. 8(4), pages 235-262.
    8. Pauline Barrieu & Nicole El Karoui, 2005. "Inf-convolution of risk measures and optimal risk transfer," LSE Research Online Documents on Economics 2829, London School of Economics and Political Science, LSE Library.

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