Fundamental Theorem of Asset Pricing under fixed and proportional transaction costs
Abstract
We show that the lack of arbitrage in a model with both fixed and proportional transaction costs is equivalent to the existence of a family of absolutely continuous singlestep probability measures, together with an adapted process with values between the bidask spreads that satisfies the martingale property with respect to each of the measures. This extends Harrison and Pliska's classical Fundamental Theorem of Asset Pricing to the case of combined fixed and proportional transaction costs.
 Publication:

arXiv eprints
 Pub Date:
 May 2019
 DOI:
 10.48550/arXiv.1905.01859
 arXiv:
 arXiv:1905.01859
 Bibcode:
 2019arXiv190501859B
 Keywords:

 Mathematics  Probability;
 Quantitative Finance  Mathematical Finance