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Robust martingale selection problem and its connections to the no-arbitrage theory

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  • Matteo Burzoni
  • Mario Sikic

Abstract

We analyze the martingale selection problem of Rokhlin (2006) in a pointwise (robust) setting. We derive conditions for solvability of this problem and show how it is related to the classical no-arbitrage deliberations. We obtain versions of the Fundamental Theorem of Asset Pricing in examples spanning frictionless markets, models with proportional transaction costs and also models for illiquid markets. In all these examples, we also incorporate trading constraints.

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  • Matteo Burzoni & Mario Sikic, 2018. "Robust martingale selection problem and its connections to the no-arbitrage theory," Papers 1801.03574, arXiv.org, revised Nov 2018.
    • Handle: RePEc:arx:papers:1801.03574
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    References listed on IDEAS

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    Cited by:

    1. Erhan Bayraktar & Matteo Burzoni, 2020. "On the quasi-sure superhedging duality with frictions," Finance and Stochastics, Springer, vol. 24(1), pages 249-275, January.

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