The Fundamental Theorem of Asset Pricing, the Hedging Problem and Maximal Claims in Financial Markets with Short Sales Prohibitions

Details The Fundamental Theorem of Asset Pricing, the Hedging Problem and Maximal Claims in Financial Markets with Short Sales Prohibitions The Fundamental Theorem of Asset Pricing, the Hedging Problem and Maximal Claims in Financial Markets with Short Sales Prohibitions

2010-12-14

arxiv.org/abs/1012.3102v4

Economy

Quantitative Finance

Pricing of Securities

Scientific paper

This paper consists of two parts. In the first part we prove the Fundamental Theorem of Asset Pricing under short sales prohibitions in continuous-time financial models where asset prices are driven by nonnegative locally bounded semimartingales. A key step in this proof is an extension of a well known result of Ansel and Stricker. In the second part we study the hedging problem in these models and connect it to a properly defined property of "maximality" of contingent claims.

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