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Sticky continuous processes have consistent price systems

  • Christian Bender

    ()

    (Saarland University)

  • Mikko S. Pakkanen

    ()

    (Aarhus University and CREATES)

  • Hasanjan Sayit

    ()

    (Durham University)

Registered author(s):

    Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi-asset price process has a consistent price system, under arbitrarily small proportional transaction costs, if it satisfies a natural multi-dimensional generalization of the stickiness condition introduced by Guasoni

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    File URL: ftp://ftp.econ.au.dk/creates/rp/13/rp13_38.pdf
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    Paper provided by School of Economics and Management, University of Aarhus in its series CREATES Research Papers with number 2013-38.

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    Length: 10
    Date of creation: 11 Aug 2013
    Date of revision:
    Handle: RePEc:aah:create:2013-38
    Contact details of provider: Web page: http://www.econ.au.dk/afn/

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    1. Jouini Elyes & Kallal Hedi, 1995. "Martingales and Arbitrage in Securities Markets with Transaction Costs," Journal of Economic Theory, Elsevier, vol. 66(1), pages 178-197, June.
    2. Attila Herczegh & Vilmos Prokaj & Mikl\'os R\'asonyi, 2013. "Diversity and no arbitrage," Papers 1301.4173, arXiv.org, revised Aug 2014.
    3. Erhan Bayraktar & Hasanjan Sayit, 2008. "On the Stickiness Property," Papers 0801.0718, arXiv.org, revised Sep 2009.
    4. Paolo Guasoni & Miklós Rásonyi & Walter Schachermayer, 2010. "The fundamental theorem of asset pricing for continuous processes under small transaction costs," Annals of Finance, Springer, vol. 6(2), pages 157-191, March.
    5. repec:fth:inseep:9513 is not listed on IDEAS
    6. Mikko S. Pakkanen, 2011. "Brownian Semistationary Processes And Conditional Full Support," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 14(04), pages 579-586.
    7. Paolo Guasoni & Mikl\'os R\'asonyi & Walter Schachermayer, 2008. "Consistent price systems and face-lifting pricing under transaction costs," Papers 0803.4416, arXiv.org.
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