As J. Harrison and S. Pliska formulate it in their classic paper [15]: “it was a desire to better understand their formula which originally motivated our study, ”. The fundamental theorems of asset pricing provide necessary and sufficient conditions for a Harrison, J. Michael; Pliska, Stanley R. (). “Martingales and. The famous result of Harrison–Pliska [?], known also as the Fundamental Theorem on Asset (or Arbitrage) Pricing (FTAP) asserts that a frictionless financial.

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The fundamental theorems of asset pricing also: An arbitrage opportunity is a way of p,iska money with no initial investment without any possibility of loss. Though arbitrage opportunities do exist briefly in real life, it has been said that any sensible market model must avoid this type of profit.


Completeness is a common property of market models harrion instance the Black—Scholes model. A complete market is one in which every contingent claim can be replicated.

EconPapers: Martingales and stochastic integrals in the theory of continuous trading

Though this property is common in models, it is not always considered desirable or realistic. In a discrete i.

When stock price returns follow a single Brownian motionthere is a unique risk neutral measure. When the stock price process is assumed to follow a more general sigma-martingale or semimartingalethen the concept of arbitrage is too narrow, and a stronger concept such as no free lunch with vanishing risk must be used to describe these opportunities in an infinite dimensional setting. From Wikipedia, the free encyclopedia. This article provides insufficient context for those unfamiliar with the subject.

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Retrieved October 14, Retrieved from ” https: Financial economics Mathematical finance Fundamental theorems. Wikipedia articles needing context from May All Wikipedia articles needing context Wikipedia harrlson cleanup from May All pages needing cleanup.


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