No-arbitrage criteria for financial markets with efficient friction
AbstractWe consider a multi-asset discrete-time model of a financial market with proportional transaction costs and efficient friction and prove necessary and sufficient conditions for the absence of arbitrage. Our main result is an extension of the Dalang-Morton-Willinger theorem. As an application, we establish a hedging theorem giving a description of the set of initial endowments which allows to super-replicate a given contingent claim.
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Bibliographic InfoArticle provided by Springer in its journal Finance and Stochastics.
Volume (Year): 6 (2002)
Issue (Month): 3 ()
Note: received: February 2001; final version received: September 2001
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Web page: http://www.springerlink.com/content/101164/
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- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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