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On the Existence of Consistent Price Systems

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  • Erhan Bayraktar
  • Mikko S. Pakkanen
  • Hasanjan Sayit

Abstract

We formulate a sufficient condition for the existence of a consistent price system (CPS), which is weaker than the conditional full support condition (CFS) introduced by Guasoni, Rasonyi, and Schachermayer [Ann. Appl. Probab., 18(2008), pp. 491-520] . We use the new condition to show the existence of CPSs for certain processes that fail to have the CFS property. In particular this condition gives sufficient conditions, under which a continuous function of a process with CFS admits a CPS, while the CFS property might be lost.

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  • Erhan Bayraktar & Mikko S. Pakkanen & Hasanjan Sayit, 2009. "On the Existence of Consistent Price Systems," Papers 0911.3789, arXiv.org, revised Jun 2013.
    • Handle: RePEc:arx:papers:0911.3789
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    References listed on IDEAS

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    1. Christian Bender & Tommi Sottinen & Esko Valkeila, 2008. "Pricing by hedging and no-arbitrage beyond semimartingales," Finance and Stochastics, Springer, vol. 12(4), pages 441-468, October.
    2. Paolo Guasoni, 2006. "No Arbitrage Under Transaction Costs, With Fractional Brownian Motion And Beyond," Mathematical Finance, Wiley Blackwell, vol. 16(3), pages 569-582, July.
    3. Erhan Bayraktar & Hasanjan Sayit, 2010. "No arbitrage conditions for simple trading strategies," Annals of Finance, Springer, vol. 6(1), pages 147-156, January.
    4. Erhan Bayraktar & Hasanjan Sayit, 2010. "On the stickiness property," Quantitative Finance, Taylor & Francis Journals, vol. 10(10), pages 1109-1112.
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