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No-arbitrage criteria for financial markets with efficient friction

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Finance and Stochastics Aims and scope Submit manuscript

Abstract.

We consider a multi-asset discrete-time model of a financial market with proportional transaction costs and efficient friction and prove necessary and sufficient conditions for the absence of arbitrage. Our main result is an extension of the Dalang–Morton–Willinger theorem. As an application, we establish a hedging theorem giving a description of the set of initial endowments which allows to super-replicate a given contingent claim.

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Authors and Affiliations

  1. Laboratoire de Mathématiques, Université de Franche-Comté, 16 Route de Gray, 25030 Besançon, Cedex France (e-mail: Yuri.Kabanov@Math.Univ-FComte.fr) , , , , , , FR

    Yuri Kabanov & Christophe Stricker

  2. Computer and Automation Institute of the Hungarian Academy of Sciences, 1111 Budapest, Hungary , , , , , , HU

    Miklós Rásonyi

Authors
  1. Yuri Kabanov
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  2. Miklós Rásonyi
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  3. Christophe Stricker
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Additional information

Manuscript received: February 2001; final version received: September 2001

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Kabanov, Y., Rásonyi, M. & Stricker, C. No-arbitrage criteria for financial markets with efficient friction. Finance Stochast 6, 371–382 (2002). https://doi.org/10.1007/s007800100062

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  • DOI: https://doi.org/10.1007/s007800100062

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