Discrete time fundamental theorem of asset pricing“

17.06.2020 14:00 - 14:20

Paul Eisenberg (University of Liverpool)


An arbitrage is a trading strategy that has zero initial position, will never lead to a loss and might even produce a gain. Hence, the terminal wealth of an arbitrage strategy can be seen as a random variable which is greater or equal zero almost surely and strictly positive with a positive probability. Such a strategy appears to be too good to exist. That is why we need to understand: When do price models do not allow for an arbitrage?
In this talk, we discuss the answer, namely the 'fundamental theorem of asset pricing (FTAP)' which is also one of the classical key tools to understand the No Arbitrage Pricing Theory. Basically, it identifies asset price models that do not allow for arbitrage via a pure stochastic condition, namely: all discounted price processes are martingales under some equivalent probability measure.

Fakultät für Mathematik
Zoom Meeting