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The Second Fundamental Theorem of Asset Pricing

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  • Robert A. Jarrow
  • Xing Jin
  • Dilip B. Madan

Abstract

This paper presents a resolution of the paradox proposed by the example of an economy with complette markets and a multiplicityof martingale measures constructed by Artzner and Heath (1995). The resolution lies in noting that completeness is with respect to a topology on the space of cash flows and is connected with uniqueness of the price functional in the topological dual space. Uniqueness may be lost outside the dual and this is what occurs in the counterexample of Artzner and Heath. Copyright Blackwell Publishers Inc 1999.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Mathematical Finance.

Volume (Year): 9 (1999)
Issue (Month): 3 ()
Pages: 255-273

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Handle: RePEc:bla:mathfi:v:9:y:1999:i:3:p:255-273

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Cited by:
  1. Kimmel, Robert L., 2004. "Modeling the term structure of interest rates: A new approach," Journal of Financial Economics, Elsevier, vol. 72(1), pages 143-183, April.
  2. Galvani, Valentina, 2007. "A note on spanning with options," Mathematical Social Sciences, Elsevier, vol. 54(1), pages 106-114, July.
  3. Galvani, Valentina & Troitsky, Vladimir G., 2010. "Options and efficiency in spaces of bounded claims," Journal of Mathematical Economics, Elsevier, vol. 46(4), pages 616-619, July.
  4. Henry Schellhorn & Didier Cossin, 2004. "Credit Risk in a Network Economy," FAME Research Paper Series rp106, International Center for Financial Asset Management and Engineering.
  5. Protter, Philip, 2001. "A partial introduction to financial asset pricing theory," Stochastic Processes and their Applications, Elsevier, vol. 91(2), pages 169-203, February.
  6. Galvani, Valentina, 2009. "Option spanning with exogenous information structure," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 73-79, January.

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