Large Financial Markets and Asymptotic Arbitrage with Small Transaction Costs
AbstractWe give characterizations of asymptotic arbitrage of the first and second kind and of strong asymptotic arbitrage for large financial markets with small proportional transaction costs $\la_n$ on market $n$ in terms of contiguity properties of sequences of equivalent probability measures induced by $\la_n$--consistent price systems. These results are analogous to the frictionless case. Our setting is simple, each market $n$ contains two assets with continuous price processes. The proofs use quantitative versions of the Halmos--Savage Theorem and a monotone convergence result of nonnegative local martingales. Moreover, we present an example admitting a strong asymptotic arbitrage without transaction costs; but with transaction costs $\la_n>0$ on market $n$ ($\la_n\to0$ not too fast) there does not exist any form of asymptotic arbitrage.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1211.0443.
Date of creation: Nov 2012
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-11 (All new papers)
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