Date
2000-12
Indexation documentaire
Economie financière
Subject
Price functionals; Bid–ask spreads; No-arbitrage assumption; Market-makers; Contingent claims
Code JEL
G13; G12
Nom de la revue
Journal of Mathematical Economics
Volume
34
Numéro
4
Date de publication
12-2000
Pages article
547-558
Nom de l'éditeur
Elsevier
Type
Article accepté pour publication ou publié
Résumé en anglais
In Jouini and Kallal (1995a), the authors characterized the absence of arbitrage opportunities for contingent claims with cash delivery in
the presence of bid-ask spreads. Other authors obtained similar results
for a more general de nition of the contingent claims but assuming some speci c price processes and transaction costs rather than bid-ask
spreads in general (see for instance, Cvitanic and Karatzas, 1996). The main di erence consists in the fact that the bid-ask ratio is constant in this last reference. This assumption does not permit to encompass
situations where the prices are determined by the buying and selling limit orders or by a (resp. competitive) specialist (resp. market-
makers). We derive in this paper some implications from the no-arbitrage assumption on the price functionals that generalizes all the previous results in a very general setting. Indeed, under some minimal assumptions on the price functional, we prove that the prices of the
contingent claims are necessarily in some minimal interval. This result
opens the waytomany empirical analyses.