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Robust No Arbitrage Condition for Continuous-time Models with Transaction Costs

In: Recent Advances In Financial Engineering 2010

Author

Listed:
  • Emmanuel Denis

    (Ceremade, Université Paris Dauphine, Place du Maréchal De Lattre De Tassigny 75775, Paris Cedex 16, France)

Abstract

We extend the Robust No Free Lunch (RNFL) theorem formulated for discrete-time models with proportional transaction costs to general continuous-time settings. We prove that the (RNFL) condition is equivalent to the existence of a strictly consistent price system, i.e. a martingale evolving in the interior of the solvency cone of all portfolio positions which can be changed into positive ones paying transaction costs.

Suggested Citation

  • Emmanuel Denis, 2011. "Robust No Arbitrage Condition for Continuous-time Models with Transaction Costs," World Scientific Book Chapters, in: Masaaki Kijima & Chiaki Hara & Yukio Muromachi & Hidetaka Nakaoka & Katsumasa Nishide (ed.), Recent Advances In Financial Engineering 2010, chapter 4, pages 69-82, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814366038_0004
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