Mathematical Finance Seminar
Date
Time
16:15
Location
RUD 25; 1.115
Stefan Gerhold (TU Vienna)

Dynamic trading under integer constraints

We first review results on arbitrage theory for some notions of "simple" strategies, which do not allow continuous portfolio rebalancing by arbitrary amounts. Then, the focus of the talk is on trading under integer constraints, that is, we assume that the offered goods or shares are traded in integer quantities instead of the usual real quantity assumption. For finite probability spaces and rational asset prices this has little effect on the core of the theory of no-arbitrage pricing. For price processes not restricted to the rational numbers, a novel theory of integer arbitrage free pricing and hedging emerges. We establish an FTAP, involving a set of absolutely continuous martingale measures satisfying an additional property. The set of prices of a contingent claim is not necessarily an interval, but is either empty or dense in an interval. We also discuss superhedging with integral portfolios. Joint work with Paul Eisenberg.