On the Existence Of Consistent Price Systems

Abstract

We formulate a sufficient condition for the existence of a consistent price system (CPS), which is weaker than the conditional full support condition (CFS). We use the new condition to show the existence of CPSs for certain processes that fail to have the CFS property. In particular this condition gives sufficient conditions, under which a continuous function of a process with CFS admits a CPS, while the CFS property might be lost.

Keywords:

• Conditional full support
• Consistent price systems
• No-arbitrage
• Stability under composition with continuous functions
• Transaction costs

2000 Mathematics Subject Classification:

• 91G10
• 62P05
• 26A45
• 60H05
• 60G44

Notes

Color versions of one or more of the figures in the article can be found online at www.tandfonline.com/lsaa