• xmlui.mirage2.page-structure.header.title
    • français
    • English
  • Help
  • Login
  • Language 
    • Français
    • English
View Item 
  •   BIRD Home
  • CEREMADE (UMR CNRS 7534)
  • CEREMADE : Publications
  • View Item
  •   BIRD Home
  • CEREMADE (UMR CNRS 7534)
  • CEREMADE : Publications
  • View Item
JavaScript is disabled for your browser. Some features of this site may not work without it.

Browse

BIRDResearch centres & CollectionsBy Issue DateAuthorsTitlesTypeThis CollectionBy Issue DateAuthorsTitlesType

My Account

LoginRegister

Statistics

Most Popular ItemsStatistics by CountryMost Popular Authors
Thumbnail - Request a copy

Arbitrage in securities markets with short-sales constraints

Jouini, Elyès; Kallal, Hedi (1995), Arbitrage in securities markets with short-sales constraints, Mathematical Finance, 5, 3, p. 197-232. http://dx.doi.org/10.1111/j.1467-9965.1995.tb00065.x

Type
Article accepté pour publication ou publié
Date
1995-07
Journal name
Mathematical Finance
Volume
5
Number
3
Publisher
Wiley
Pages
197-232
Publication identifier
http://dx.doi.org/10.1111/j.1467-9965.1995.tb00065.x
Metadata
Show full item record
Author(s)
Jouini, Elyès
Kallal, Hedi
Abstract (EN)
In this paper we derive the implications of the absence of arbitrage in securities markets models where traded securities are subject to short-sales constraints and where the borrowing and lending rates differ. We show that a securities price system is arbitrage free if and only if there exists a numeraire and an equivalent probability measure for which the normalized (by the numeraire) price processes of traded securities are supermartingales. Also, the tightest arbitrage bounds that can be inferred on the price of a contingent claim without knowing agents’preferences are equal to its largest and smallest expected normalized payoff with respect to the supermartingale measures. In the case where the underlying security price follows a diffusion process and where short selling is possible but costly, we derive partial differential equations that must be satisfied by the arbitrage bounds on derivative securities prices, and we determine optimal hedging strategies. We compute the arbitrage bounds on common securities numerically for several values of the borrowing and short-selling costs and show that they can be quite sharp.
Subjects / Keywords
Short-sales constraints; borrowing costs; martingale approach; equivalent supermatingale and submartingale measures; perturbed heat equation; arbitrage bounds; hedging
JEL
G10 - General
G13 - Contingent Pricing; Futures Pricing
C73 - Stochastic and Dynamic Games; Evolutionary Games; Repeated Games

Related items

Showing items related by title and author.

  • Thumbnail
    Martingales and arbitrage in securities markets with transaction costs 
    Kallal, Hedi; Jouini, Elyès (1995-06) Article accepté pour publication ou publié
  • Thumbnail
    Arbitrage and viability in securities markets with fixed trading costs 
    Jouini, Elyès; Napp, Clotilde; Kallal, Hedi (2001-04) Article accepté pour publication ou publié
  • Thumbnail
    Viability and equilibrium in securities markets with frictions 
    Jouini, Elyès; Kallal, Hedi (1999-07) Article accepté pour publication ou publié
  • Thumbnail
    Investment and arbitrage opportunities with short sales constraints 
    Jouini, Elyès; Carassus, Laurence (1998-07) Article accepté pour publication ou publié
  • Thumbnail
    Characterizing the premium at the equilibrium of a reinsurance market with short sale constraints 
    Bernis, Guillaume; Jouini, Elyès (2001) Chapitre d'ouvrage
Dauphine PSL Bibliothèque logo
Place du Maréchal de Lattre de Tassigny 75775 Paris Cedex 16
Phone: 01 44 05 40 94
Contact
Dauphine PSL logoEQUIS logoCreative Commons logo