Asymptotic arbitrage and numéraire portfolios in large financial markets

Details Asymptotic arbitrage and numéraire portfolios in large financial markets Asymptotic arbitrage and numéraire portfolios in large financial markets

2007-02-27

arxiv.org/abs/math/0702849v1

Mathematics

Probability

18 pages

Scientific paper

This paper deals with the notion of a large financial market and the concepts of asymptotic arbitrage and strong asymptotic arbitrage (both of the first kind), introduced by Yu.M. Kabanov and D.O. Kramkov. We show that the arbitrage properties of a large market are completely determined by the asymptotic behavior of the sequence of the num\'eraire portfolios, related to the small markets. The obtained criteria can be expressed in terms of contiguity, entire separation and Hellinger integrals, provided these notions are extended to sub-probability measures. As examples we consider market models on finite probability spaces, semimartingale and diffusion models. Also a discrete-time infinite horizon market model with one log-normal stock is examined.

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