Finance Without Probabilistic Prior Assumptions
AbstractWe develop the fundamental theorem of asset pricing in a probability-free infinite-dimensional setup. We replace the usual assumption of a prior probability by a certain continuity property in the state variable. Probabilities enter then endogenously as full support martingale measures (instead of equivalent martingale measures). A variant of the Harrison-Kreps-Theorem on viability and no arbitrage is shown. Finally, we show how to embed the superhedging problem in a classical infinite-dimensional linear programming problem.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1107.1078.
Date of creation: Jul 2011
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Web page: http://arxiv.org/
Other versions of this item:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-07-13 (All new papers)
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- Larry Epstein & Shaolin Ji, 2011. "Ambiguous Volatility, Possibility and Utility in Continuous Time," Papers 1103.1652, arXiv.org, revised Jan 2013.
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- Marcel Nutz, 2013. "Superreplication under Model Uncertainty in Discrete Time," Papers 1301.3227, arXiv.org.
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