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On the law of one price

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Author Info
Jean-Michel Courtault ()
Freddy Delbaen ()
Yuri Kabanov ()
Christophe Stricker ()

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Abstract

We consider the standard discrete-time model of a frictionless financial market and show that the law of one price holds if and only if there exists a martingale density process with strictly positive initial value. In contrast to the classical no-arbitrage criteria, this density process may change its sign. We also give an application to the CAPM. Copyright Springer-Verlag Berlin/Heidelberg 2004

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File URL: http://hdl.handle.net/10.1007/s00780-004-0124-9
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Publisher Info
Article provided by Springer in its journal Finance and Stochastics.

Volume (Year): 8 (2004)
Issue (Month): 4 (November)
Pages: 525-530
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Handle: RePEc:spr:finsto:v:8:y:2004:i:4:p:525-530

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Web page: http://www.springerlink.com/content/101164/

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Related research
Keywords: Law of one price; Harrison-Pliska theorem; Dalang-Morton-Willinger theorem; market portfolio; CAPM;

Cited by:
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  1. Teemu Pennanen, 2008. "Superhedging in illiquid markets," Quantitative Finance Papers 0807.2962, arXiv.org. [Downloadable!]
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This page was last updated on 2009-12-22.

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