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Title: Notes on free lunch in the limit and pricing by conjugate duality theory (English)
Author: Henclová, Alena
Language: English
Journal: Kybernetika
ISSN: 0023-5954
Volume: 42
Issue: 1
Year: 2006
Pages: 57-76
Summary lang: English
Category: math
Summary: King and Korf [KingKorf01] introduced, in the framework of a discrete- time dynamic market model on a general probability space, a new concept of arbitrage called free lunch in the limit which is slightly weaker than the common free lunch. The definition was motivated by the attempt at proposing the pricing theory based on the theory of conjugate duality in optimization. We show that this concept of arbitrage fails to have a basic property of other common concepts used in pricing theory – it depends on the underlying probability measure more than through its null sets. However, we show that the interesting pricing results obtained by conjugate duality are still valid if it is only assumed that the market admits no free lunch rather than no free lunch in the limit. (English)
Keyword: free lunch
Keyword: free lunch in the limit
Keyword: fundamental theorem of asset pricing
Keyword: incomplete markets
Keyword: arbitrage pricing
Keyword: multistage stochastic programming
Keyword: conjugate duality
Keyword: finitely-additive measures
MSC: 49N15
MSC: 90C15
MSC: 91B26
MSC: 91B28
idZBL: Zbl 1249.90180
idMR: MR2208520
Date available: 2009-09-24T20:14:00Z
Last updated: 2015-03-28
Stable URL:
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