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- A Computational Approach To The Fundamental Theorem Of Asset Pricing In A Single-Period Market

Author

Listed:
  • Antonio Falcó

    (Universidad Cardenal Herrera)

  • Antonio Rubia

    (Universidad de Alicante)

  • F. Acedo

    (Universidad de Alicante)

  • Francis Benito

    (Universidad de Alicante)

  • J. Torres

    (Universidad CEU San Pablo)

Abstract

In this paper we provide a new approach to the Fundamental Theorem of As-set Pricing. The proofof this result is usually based on Projection (Separation) Theorems and is far more intuitive. Ourapproach follow the relation between the projection problem an equivalent least squares problem.More precisely, we will use and iterative procedure in order to obtain solutions of a bounded leastsquare problem. This solutions will give, under some conditions, either the state price vector orthe arbitrage opportunity of the problem under consideration.

Suggested Citation

  • Antonio Falcó & Antonio Rubia & F. Acedo & Francis Benito & J. Torres, 1999. "- A Computational Approach To The Fundamental Theorem Of Asset Pricing In A Single-Period Market," Working Papers. Serie AD 1999-29, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1999-29
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1999-29.pdf
    File Function: Fisrt version / Primera version, 1999
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