English

Pointwise Arbitrage Pricing Theory in Discrete Time

Mathematical Finance 2018-02-08 v2 Probability

Abstract

We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain an abstract (pointwise) Fundamental Theorem of Asset Pricing and Pricing--Hedging Duality. Our results are general and in particular include so-called model independent results of Acciao et al. (2016), Burzoni et al. (2016) as well as seminal results of Dalang et al. (1990) in a classical probabilistic approach. Our analysis is scenario--based: a model specification is equivalent to a choice of scenarios to be considered. The choice can vary between all scenarios and the set of scenarios charged by a given probability measure. In this way, our framework interpolates between a model with universally acceptable broad assumptions and a model based on a specific probabilistic view of future asset dynamics.

Keywords

Cite

@article{arxiv.1612.07618,
  title  = {Pointwise Arbitrage Pricing Theory in Discrete Time},
  author = {Matteo Burzoni and Marco Frittelli and Zhaoxu Hou and Marco Maggis and Jan Obłój},
  journal= {arXiv preprint arXiv:1612.07618},
  year   = {2018}
}
R2 v1 2026-06-22T17:32:25.201Z