Put-Call Parity and Market Frictions
AbstractWe extend the Fundamental Theorem of Finance and the Pricing Rule Representation Theorem of Cox and Ross (see Ross  and  and Cox and Ross ) to the case in which market frictions are aken into account but the Put-Call Parity is still assumed to hold. In turn, we obtain a representation of the pricing rule as a discounted expectation with respect to a nonadditive risk neutral probability. As a further contribution, in so doing we endogenize the state space structure and the contingent claim representation usually assumed to represent assets and markets.
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Bibliographic InfoPaper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 447.
Date of creation: 2012
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-08-23 (All new papers)
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