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Options and Efficiency in Spaces of Bounded Claims

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  • Galvani, Valentina

    () (University of Alberta, Department of Economics)

  • Troitsky, Vladimir

    () (University of Alberta)

Abstract

Supplementing a finite state-space static securities market with options obtains market completeness. This study concludes that options maintain the same spanning power in the space of bounded payoff topologized by its duality with the space of the state price densities.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2009-4.

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Length: 25 pages
Date of creation: 01 Jan 2009
Date of revision:
Handle: RePEc:ris:albaec:2009_004

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Keywords: spanning; options; market completeness; efficiency;

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  1. Ross, Stephen A, 1976. "Options and Efficiency," The Quarterly Journal of Economics, MIT Press, vol. 90(1), pages 75-89, February.
  2. Galvani, Valentina, 2007. "A note on spanning with options," Mathematical Social Sciences, Elsevier, vol. 54(1), pages 106-114, July.
  3. Battig, Robert J & Jarrow, Robert A, 1999. "The Second Fundamental Theorem of Asset Pricing: A New Approach," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 1219-35.
  4. Nachman, David C., 1987. "Efficient funds for meager asset spaces," Journal of Economic Theory, Elsevier, vol. 43(2), pages 335-347, December.
  5. Charalambos D. Aliprantis & Rabee Tourky, 2002. "Markets That Don'T Replicate Any Option," Department of Economics - Working Papers Series 832, The University of Melbourne.
  6. Galvani, Valentina, 2007. "Underlying assets for which options complete the market," Finance Research Letters, Elsevier, vol. 4(1), pages 59-66, March.
  7. Brown, Donald J & Ross, Stephen A, 1991. "Spanning, Valuation and Options," Economic Theory, Springer, vol. 1(1), pages 3-12, January.
  8. Alexandre M. Baptista, 2005. "Options And Efficiency In Multidate Security Markets," Mathematical Finance, Wiley Blackwell, vol. 15(4), pages 569-587.
  9. Arditti, Fred D. & John, Kose, 1980. "Spanning the State Space with Options," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(01), pages 1-9, March.
  10. Alexandre Baptista, 2007. "On the Non-Existence of Redundant Options," Economic Theory, Springer, vol. 31(2), pages 205-212, May.
  11. Galvani, Valentina, 2009. "Option spanning with exogenous information structure," Journal of Mathematical Economics, Elsevier, vol. 45(1-2), pages 73-79, January.
  12. Baptista, Alexandre M., 2003. "Spanning with American options," Journal of Economic Theory, Elsevier, vol. 110(2), pages 264-289, June.
  13. Robert A. Jarrow & Xing Jin & Dilip B. Madan, 1999. "The Second Fundamental Theorem of Asset Pricing," Mathematical Finance, Wiley Blackwell, vol. 9(3), pages 255-273.
  14. John, Kose, 1984. "Market Resolution and Valuation in Incomplete Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(01), pages 29-44, March.
  15. Green, Richard C. & Jarrow, Robert A., 1987. "Spanning and completeness in markets with contingent claims," Journal of Economic Theory, Elsevier, vol. 41(1), pages 202-210, February.
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