On the density of properly maximal claims in financial markets with transaction costs

Details On the density of properly maximal claims in financial markets with transaction costs On the density of properly maximal claims in financial markets with transaction costs

2006-02-26

arxiv.org/abs/math/0602592v2

Annals of Applied Probability 2007, Vol. 17, No. 2, 716-740

Mathematics

Probability

Published at http://dx.doi.org/10.1214/105051606000000880 in the Annals of Applied Probability (http://www.imstat.org/aap/) by

Scientific paper

10.1214/105051606000000880

We consider trading in a financial market with proportional transaction costs. In the frictionless case, claims are maximal if and only if they are priced by a consistent price process--the equivalent of an equivalent martingale measure. This result fails in the presence of transaction costs. A properly maximal claim is one which does have this property. We show that the properly maximal claims are dense in the set of maximal claims (with the topology of convergence in probability).

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