Characterization of arbitrage-free market
King and Korf  introduced a new framework for analyzing pricing theory for incomplete markets and contingent claims. The fundamental theorem of asset pricing was reformulated in a very general form. We mentioned in  that their characterization of the arbitrage-free market is not correct. Now we propose an equivalent characterization of the arbitrage-free market: the market admits no free lunch in the limit if and only if there exist finitely additive equivalent martingale measure Q and 8 > 0 such that Q(E) :::::8. P(E) for any measurable set E.
Volume (Year): 10 (2003)
Issue (Month): 19 ()
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