JSM 2011 Online Program

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Abstract Details

Activity Number: 520
Type: Contributed
Date/Time: Wednesday, August 3, 2011 : 10:30 AM to 12:20 PM
Sponsor: IMS
Abstract - #301916
Title: The Fundamental Theorem of Asset Pricing with No Short Selling
Author(s): Scott McClintock*+ and Stephen Clark
Companies: West Chester University and Emory University
Address: 25 University Ave, West Chester, PA, 19383,
Keywords: arbitrage ; martingale ; applied probability
Abstract:

The Fundamental Theorem of Asset Pricing, under the assumption of restricted short selling, states that there is no feasible arbitrage if and only if there exists an equivalent supermartingale measure. Such a result has been demonstrated by authors such as Schurger (1996) and Evstigneev, Schurger, and Taksar (2004). Borrowing on ideas used by Kabanov and Kramkov (1994) and Schurger (1996), and under the assumption of a degeneracy condition, we provide a simple, elegant proof of this result that uses only basic probability arguments and techniques. We then go on to sharpen the preceding result and demonstrate that, assuming this degeneracy condition holds, that a market satisfies no feasible arbitrage if and only there exists an equivalent martingale measure.


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