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Sticky continuous processes have consistent price systems

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Author Info

  • Christian Bender

    ()
    (Saarland University)

  • Mikko S. Pakkanen

    ()
    (Aarhus University and CREATES)

  • Hasanjan Sayit

    ()
    (Durham University)

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    Abstract

    Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi-asset price process has a consistent price system, under arbitrarily small proportional transaction costs, if it satisfies a natural multi-dimensional generalization of the stickiness condition introduced by Guasoni

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    File URL: ftp://ftp.econ.au.dk/creates/rp/13/rp13_38.pdf
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    Bibliographic Info

    Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2013-38.

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    Length: 10
    Date of creation: 11 Aug 2013
    Date of revision:
    Handle: RePEc:aah:create:2013-38

    Contact details of provider:
    Web page: http://www.econ.au.dk/afn/

    Related research

    Keywords: Consistent price system; stickiness; martingale; arbitrage; transaction costs;

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    References

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    1. Erhan Bayraktar & Hasanjan Sayit, 2010. "On the stickiness property," Quantitative Finance, Taylor & Francis Journals, vol. 10(10), pages 1109-1112.
    2. Paolo Guasoni & Miklós Rásonyi & Walter Schachermayer, 2010. "The fundamental theorem of asset pricing for continuous processes under small transaction costs," Annals of Finance, Springer, vol. 6(2), pages 157-191, March.
    3. Mikko S. Pakkanen, 2011. "Brownian Semistationary Processes And Conditional Full Support," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 579-586.
    4. Paolo Guasoni & Mikl\'os R\'asonyi & Walter Schachermayer, 2008. "Consistent price systems and face-lifting pricing under transaction costs," Papers 0803.4416, arXiv.org.
    5. Attila Herczegh & Vilmos Prokaj & Mikl\'os R\'asonyi, 2013. "Diversity and no arbitrage," Papers 1301.4173, arXiv.org.
    6. repec:fth:inseep:9513 is not listed on IDEAS
    7. Jouini Elyes & Kallal Hedi, 1995. "Martingales and Arbitrage in Securities Markets with Transaction Costs," Journal of Economic Theory, Elsevier, vol. 66(1), pages 178-197, June.
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    Cited by:
    1. Sebastian. E. Ferrando & Alfredo L. Gonzalez & Ivan L. Degano & Massoome Rahsepar, 2014. "Discrete, Non Probabilistic Market Models. Arbitrage and Pricing Intervals," Papers 1407.1769, arXiv.org.

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