Next Article in Journal
A Markov Chain Model for Contagion
Previous Article in Journal
Measuring Risk When Expected Losses Are Unbounded
Open AccessArticle

A Note on the Fundamental Theorem of Asset Pricing under Model Uncertainty

Department of Mathematics, University of Michigan, 530 Church Street, Ann Arbor, MI 48109, USA
*
Author to whom correspondence should be addressed.
Risks 2014, 2(4), 425-433; https://doi.org/10.3390/risks2040425
Received: 13 May 2014 / Revised: 22 August 2014 / Accepted: 28 September 2014 / Published: 10 October 2014
We show that the recent results on the Fundamental Theorem of Asset Pricing and the super-hedging theorem in the context of model uncertainty can be extended to the case in which the options available for static hedging (hedging options) are quoted with bid-ask spreads. In this set-up, we need to work with the notion of robust no-arbitrage which turns out to be equivalent to no-arbitrage under the additional assumption that hedging options with non-zero spread are non-redundant. A key result is the closedness of the set of attainable claims, which requires a new proof in our setting. View Full-Text
Keywords: Model uncertainty; bid-ask prices for options; semi-static hedging; non-dominated collection of probability measures; Fundamental Theorem of Asset Pricing; super-hedging; robust no-arbitrage; non-redundant options Model uncertainty; bid-ask prices for options; semi-static hedging; non-dominated collection of probability measures; Fundamental Theorem of Asset Pricing; super-hedging; robust no-arbitrage; non-redundant options
MDPI and ACS Style

Bayraktar, E.; Zhang, Y.; Zhou, Z. A Note on the Fundamental Theorem of Asset Pricing under Model Uncertainty. Risks 2014, 2, 425-433.

Show more citation formats Show less citations formats

Article Access Map by Country/Region

1
Only visits after 24 November 2015 are recorded.
Search more from Scilit
 
Search
Back to TopTop