No-Arbitrage Pricing for Dividend-Paying Securities in Discrete-Time Markets with Transaction Costs
AbstractWe prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction assumption is equivalent to the existence of a risk-neutral measure. We derive dual representations for the superhedging ask and subhedging bid price processes of a derivative contract. Our results are illustrated with a vanilla credit default swap contract.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1205.6254.
Date of creation: May 2012
Date of revision: Jun 2013
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- repec:fth:inseep:9513 is not listed on IDEAS
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