The Annals of Applied Probability

The fundamental theorem of asset pricing, the hedging problem and maximal claims in financial markets with short sales prohibitions

Sergio Pulido

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Abstract

This paper consists of two parts. In the first part we prove the fundamental theorem of asset pricing under short sales prohibitions in continuous-time financial models where asset prices are driven by nonnegative, locally bounded semimartingales. A key step in this proof is an extension of a well-known result of Ansel and Stricker. In the second part we study the hedging problem in these models and connect it to a properly defined property of “maximality” of contingent claims.

Article information

Source
Ann. Appl. Probab., Volume 24, Number 1 (2014), 54-75.

Dates
First available in Project Euclid: 9 January 2014

Permanent link to this document
https://projecteuclid.org/euclid.aoap/1389278719

Digital Object Identifier
doi:10.1214/12-AAP914

Mathematical Reviews number (MathSciNet)
MR3161641

Zentralblatt MATH identifier
1290.91166

Subjects
Primary: 60H05: Stochastic integrals 60H30: Applications of stochastic analysis (to PDE, etc.)

Keywords
Fundamental theorem of asset pricing hedging problem maximal claims supermartingale measures short sales prohibition

Citation

Pulido, Sergio. The fundamental theorem of asset pricing, the hedging problem and maximal claims in financial markets with short sales prohibitions. Ann. Appl. Probab. 24 (2014), no. 1, 54--75. doi:10.1214/12-AAP914. https://projecteuclid.org/euclid.aoap/1389278719


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