STRUCTURE CONDITIONS UNDER SHORT-SALES CONSTRAINTS AND APPLICATIONS TO CONVERGING ASSET PRICES

Délia Coculescu (1) , Monique Jeanblanc (2)

1 DRM - Dauphine Recherches en Management
2 LaMME - Laboratoire de Mathématiques et Modélisation d'Evry

Under short sales prohibitions, no free lunch with vanishing risk (NFLVR-S) is known to be equivalent to the existence of an equivalent supermartingale measure for the price processes (Pulido [23]). For two given price processes, we translate the property (NFLVR-S) in terms of so called structure conditions and we introduce the concept of fundamental supermartingale measure. When a certain condition necessary to the construction of the fundamental supermartingale measure is not fulfilled, we provide the corresponding arbitrage portfolios. The motivation of our study lies in understanding the particular case of converging prices, i.e., that coincide at a bounded random time.

Domaines: Probabilités [math.PR]

Délia Coculescu, Monique Jeanblanc. STRUCTURE CONDITIONS UNDER SHORT-SALES CONSTRAINTS AND APPLICATIONS TO CONVERGING ASSET PRICES. 2018. ⟨hal-01777810⟩