2010/02/14 by Constantinos Kardaras, Kardaras, Constantinos
Economics, Econometrics and Finance · #Economic theories and models #FOS: Economics and business #General Finance (q-fin.GN) #q-fin.GN
paper · pdf · doi:10.48550/arxiv.1002.2741
3 pages; a version of this note will appear in the Encyclopaedia of Quantitative Finance, John Wiley and Sons Inc
arxiv created 2010/02/14 · openalex publication_date 2010/02/14 · arxiv updated 2010/02/26 · openalex created_date 2022/09/12 · openalex updated_date 2026/07/28
The concept of absence of opportunities for free lunches is one of the pillars in the economic theory of financial markets. This natural assumption has proved very fruitful and has lead to great mathematical, as well as economical, insights in Quantitative Finance. Formulating rigorously the exact definition of absence of opportunities for riskless profit turned out to be a highly non-trivial fact that troubled mathematicians and economists for at least two decades. The purpose of this note is to give a quick (and, necessarily, incomplete) account of the recent work aimed at providing a simple and intuitive no-free-lunch assumption that would suffice in formulating a version of the celebrated Fundamental Theorem of Asset Pricing.