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Investment and arbitrage opportunities with short sales constraints

Jouini, Elyès; Carassus, Laurence (1998), Investment and arbitrage opportunities with short sales constraints, Mathematical Finance, 8, 3, p. 169–178. http://dx.doi.org/10.1111/1467-9965.00051

Type
Article accepté pour publication ou publié
Date
1998-07
Journal name
Mathematical Finance
Volume
8
Number
3
Publisher
Oxford Blackwell Publishers
Pages
169–178
Publication identifier
http://dx.doi.org/10.1111/1467-9965.00051
Metadata
Show full item record
Author(s)
Jouini, Elyès
Carassus, Laurence
Abstract (EN)
In this paper we consider a family of investment projects defined by their deterministic cash flows. We assume stationarity—that is, projects available today are the same as those available in the past. In this framework, we prove that the absence of arbitrage opportunities is equivalent to the existence of a discount rate such that the net present value of all projects is nonpositive if the projects cannot be sold short and is equal to zero otherwise. Our result allows for an infinite number of projects and for continuous as well as discrete cash flows, generalizing similar results established by Cantor and Lippman (1983, 1995) and Adler and Gale (1997) in a discrete time framework and for a finite number of projects.
Subjects / Keywords
Investment; short sales constraint; stationarity; arbitrage; Radon measure; Laplace transform
JEL
E44 - Financial Markets and the Macroeconomy
G11 - Portfolio Choice; Investment Decisions

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