Market free lunch and large financial markets

Details Market free lunch and large financial markets Market free lunch and large financial markets

2007-02-14

arxiv.org/abs/math/0702409v1

Annals of Applied Probability 2006, Vol. 16, No. 4, 2055-2077

Mathematics

Probability

Published at http://dx.doi.org/10.1214/105051606000000484 in the Annals of Applied Probability (http://www.imstat.org/aap/) by

Scientific paper

10.1214/105051606000000484

The main result of the paper is a version of the fundamental theorem of asset pricing (FTAP) for large financial markets based on an asymptotic concept of no market free lunch for monotone concave preferences. The proof uses methods from the theory of Orlicz spaces. Moreover, various notions of no asymptotic arbitrage are characterized in terms of no asymptotic market free lunch; the difference lies in the set of utilities. In particular, it is shown directly that no asymptotic market free lunch with respect to monotone concave utilities is equivalent to no asymptotic free lunch. In principle, the paper can be seen as the large financial market analogue of [Math. Finance 14 (2004) 351--357] and [Math. Finance 16 (2006) 583--588].

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