No-arbitrage of second kind in countable markets with proportional transaction costs

Economy – Quantitative Finance – Computational Finance

Scientific paper

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Adds in v2: A counter-example and Corrected typos

Scientific paper

Motivated by applications to bond markets, we propose a multivariate framework for discrete time financial markets with proportional transaction costs and a countable infinite number of tradable assets. We show that the no-arbitrage of second kind property (NA2 in short), introduced by \cite{ras09} for finite dimensional markets, allows to provide a closure property for the set of attainable claims in a very natural way, under a suitable efficient friction condition. We also extend to this context the equivalence between NA2 and the existence of multiple (strictly) consistent price systems.

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