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No-arbitrage conditions and pricing from discrete-time to continuous-time strategies

Author

Listed:
  • Dorsaf Cherif

    (El Manar University
    El Manar University)

  • Emmanuel Lépinette

    (Paris Dauphine University, PSL
    El Manar University)

Abstract

In this paper, a general framework is developed for continuous-time financial market models defined from simple strategies through conditional topologies that avoid stochastic calculus and do not necessitate semimartingale models. We then compare the usual no-arbitrage conditions of the literature, e.g. the usual no-arbitrage conditions NFL, NFLVR and NUPBR and the recent AIP condition. With appropriate pseudo-distance topologies, we show that they hold in continuous time if and only if they hold in discrete time. Moreover, the super-hedging prices in continuous time coincide with the discrete-time super-hedging prices, even without any no-arbitrage condition.

Suggested Citation

  • Dorsaf Cherif & Emmanuel Lépinette, 2023. "No-arbitrage conditions and pricing from discrete-time to continuous-time strategies," Annals of Finance, Springer, vol. 19(2), pages 141-168, June.
    • Handle: RePEc:kap:annfin:v:19:y:2023:i:2:d:10.1007_s10436-023-00426-1
    DOI: 10.1007/s10436-023-00426-1
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    References listed on IDEAS

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    More about this item

    Keywords

    No-arbitrage condition; Super-hedging price; AIP condition; NFL condition; Discrete-time financial model; Continuous-time financial market model;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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