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Fragility of Local Martingale Diffusion Models of Arbitrage and Bubbles

Paolo GuasoniMiklos Rasonyi

出版	SSRN, 2014
URL	http://books.google.com.hk/books?id=FRjezwEACAAJ&hl=&source=gbs_api

註釋

For any positive diffusion with minimal regularity, there exists a semimartingale, with uniformly close paths, which is a martingale under an equivalent probability. As a result, in models of asset prices based on such diffusions, arbitrage and bubbles alike disappear under proportional transaction costs, or under small model misspecifications. Thus, local martingale models of arbitrage and bubbles are not robust to small trading and monitoring frictions.