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On the completeness of a constrained market

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Author Info

  • Erio Castagnoli
  • Gino Favero
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    Abstract

    We show how the well-known Farkas Lemma, commonly used to characterise absence of arbitrages in perfect markets, is also exploitable to ascertain the completeness of a market with total short sales constraints. The generalisation of this lemma to convex cones also allows to characterise the completeness of a market with general conic constraints on investment strategies. Such results can be also applied to tell whether it is possible to hedge perfectly any risky position with a given set of tools.

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    File URL: http://www.inderscience.com/link.php?id=20041
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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Applied Management Science.

    Volume (Year): 1 (2008)
    Issue (Month): 1 ()
    Pages: 90-96

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    Handle: RePEc:ids:injams:v:1:y:2008:i:1:p:90-96

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    Web page: http://www.inderscience.com/browse/index.php?journalID=286

    Related research

    Keywords: market completeness; short-sale constraints; Farkas Lemma; constrained markets; investment strategies; hedging.;

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