No Arbitrage and General Semimartingales
Philip Protter, Kazuhiro Shimbo
Abstract
No free lunch with vanishing risk (NFLVR) is known to be equivalent to the existence of an equivalent martingale measure for the price process semimartingale. We give necessary conditions for such a semimartingale to have the property NFLVR. We also extend Novikov’s criterion for the stochastic exponential of a local martingale to be a martingale to the general case; that is, the case where the paths need not be continuous.
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Permanent link to this document: http://projecteuclid.org/euclid.imsc/1233152947
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