The no-arbitrage-theory tag has no wiki summary.
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Fundamental Theorem of Asset Pricing (FTAP)
In the spirit of canonical questions please state here versions of the FTAP in the following form (please only one theorem by answer) :
Necessary definitions (or a direct link to definitions)
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6
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2answers
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Efficiency vs. Robustness - To use a constant or not in single factor time-series regression?
Arbitrage pricing theory states that expected returns for a security are linear combination of exposures to risk factors and the returns on these risk factors. Betas, or the exposures of the security ...
4
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1answer
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Non-arbitrage theory and existence of a risk premium
Consider a probability filtred space $(\Omega, \mathcal F, \mathbb F, \mathbb P)$, where $\mathbb F = (\mathcal F_t)_{0\leq t\leq T}$ satisfing the habitual conditions and isgenerated by $1 d $- ...
3
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1answer
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Sufficient conditions for no static arbitrage
In Carr and Madan (2005), the authors give sufficient conditions for a set of call prices to arise as integrals of a risk-neutral probability distribution (See Breeden and Litzenberger (1978)), and ...
3
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1answer
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Equivalent (true) Martingale Measures and no-arbitrage conditions
I hope this is the correct site for this question, as it is rather theoretical...
In their famous paper, Delbaen and Schachermayer proved that the No Free Lunch with Vanishing Risk condition is ...
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0answers
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Arbitrage free price of a derivative when the price is collected over the lifetime of the derivative
Let $X_t$ be an american style financial derivative with random exercise time $T$
where $t$ and $T$ belongs to some finite set $A$.
Buying this derivative requires the buyer to pay $p_t$ up to time ...
2
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0answers
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Stochastic discount factor (aka deflator or pricing kernel) and class D processes
When (under what assumptions on the model) does a Stochastic Discount Factor need to be of Class D? What would be the implications if it was not? Is it connected to one of the no-arbitrage notions?
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1answer
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inflation > interest rate? [closed]
Currently, the federal reserve interest rate is 0-0.25%, and the inflation is 2-3%. Does this contradict the no-arbitrage principle? (The arbitrage being: borrow money at 0.25% and invest it in the ...
