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Dynamic Arbitrage‐Free Asset Pricing with Proportional Transaction Costs |
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| Authors: | SHUNMING ZHANG CHUNLEI XU XIAOTIE DENG |
| Abstract: | This paper studies multiperiod asset pricing theory in arbitrage‐free financial markets with proportional transaction costs. The mathematical formulation is based on a Euclidean space for weakly arbitrage‐free security markets and strongly arbitrage‐free security markets. We establish the weakly arbitrage‐free pricing theorem and the strongly arbitrage‐free pricing theorem. |
| Keywords: | the first fundamental valuation theorems frictional markets weak arbitrage‐freeness strong arbitrage‐freeness arbitrage‐free pricing theory |