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A note on arbitrage, approximate arbitrage and the fundamental theorem of asset pricing

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  • Claudio Fontana

    (MATHRISK - Mathematical Risk handling - Inria Paris-Rocquencourt - Inria - Institut National de Recherche en Informatique et en Automatique - UPEM - Université Paris-Est Marne-la-Vallée - ENPC - École des Ponts ParisTech)

Abstract

We provide a critical analysis of the proof of the fundamental theorem of asset pricing given in the paper Arbitrage and approximate arbitrage: the fundamental theorem of asset pricing by B. Wong and C.C. Heyde (Stochastics, 2010) in the context of incomplete Itô-process models. We show that their approach can only work in the known case of a complete financial market and give an explicit counterexample.

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  • Claudio Fontana, 2013. "A note on arbitrage, approximate arbitrage and the fundamental theorem of asset pricing," Working Papers hal-00818487, HAL.
    • Handle: RePEc:hal:wpaper:hal-00818487
    Note: View the original document on HAL open archive server: https://inria.hal.science/hal-00818487
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    References listed on IDEAS

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    1. Hardy Hulley, 2009. "Strict Local Martingales in Continuous Financial Market Models," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 2-2009.
    2. Hardy Hulley, 2009. "Strict Local Martingales in Continuous Financial Market Models," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 19, July-Dece.
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