A Simple Proof of the Fundamental Theorem of Asset Pricing
Mathematical Finance
2019-12-04 v1
Abstract
A simple statement and accessible proof of a version of the Fundamental Theorem of Asset Pricing in discrete time is provided. Careful distinction is made between prices and cash flows in order to provide uniform treatment of all instruments. There is no need for a ``real-world'' measure in order to specify a model for derivative securities, one simply specifies an arbitrage free model, tunes it to market data, and gets down to the business of pricing, hedging, and managing the risk of derivative securities.
Keywords
Cite
@article{arxiv.1912.01091,
title = {A Simple Proof of the Fundamental Theorem of Asset Pricing},
author = {Keith A. Lewis},
journal= {arXiv preprint arXiv:1912.01091},
year = {2019}
}