No-Free-Lunch equivalences for exponential Levy models

2008/03/14 by Constantinos Kardaras, Kardaras, Constantinos
Economics, Econometrics and Finance · Mathematics · #60H05 #60H30 #91B28 #Economic theories and models #FOS: Economics and business #FOS: Mathematics #Financial Risk and Volatility Modeling #Pricing of Securities (q-fin.PR) #Probability (math.PR) #Stochastic processes and financial applications #math.PR #msc:60H05 #msc:60H30 #msc:91B28 #q-fin.PR

paper · pdf · doi:10.48550/arxiv.0803.2169

29 pages

arxiv created 2008/03/14 · openalex publication_date 2008/03/14 · arxiv updated 2009/12/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

We provide equivalence of numerous no-free-lunch type conditions for financial markets where the asset prices are modeled as exponential Levy processes, under possible convex constraints in the use of investment strategies. The general message is the following: if any kind of free lunch exists in these models it has to be of the most egregious type, generating an increasing ealth. Furthermore, we connect the previous to the existence of the numeraire portfolio, both for its particular expositional clarity in exponential Levy models and as a first step in obtaining analogues of the no-free-lunch equivalences in general semimartingale models.

Citations

• The Fine Structure of Asset Returns: An Empirical Investigation

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