Abstract
Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi-asset price process has a consistent price system, under arbitrarily small proportional transaction costs, if it satisfies a natural multi-dimensional generalization of the stickiness condition introduced by Guasoni (2006).
| Original language | English |
|---|---|
| Pages (from-to) | 586-594 |
| Number of pages | 9 |
| Journal | Journal of Applied Probability |
| Volume | 52 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 1 Jun 2015 |
| Externally published | Yes |
Keywords
- Arbitrage
- Consistent price system
- Martingale
- Stickiness
- Transaction costs
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Bender, C., Pakkanen, M. S., & Sayit, H. (2015). Sticky continuous processes have consistent price systems. Journal of Applied Probability, 52(2), 586-594. https://doi.org/10.1239/jap/1437658617