Investment and Arbitrage Opportunities with Short Sales Constraints

Posted: 15 Aug 2007

See all articles by Elyes Jouini

Elyes Jouini

Univ. Paris Dauphine - CEREMADE

Laurence Carassus

Université Paris VII Denis Diderot

Abstract

In this paper we consider a family of investment project defined by their deterministic cash flows. We assume stationarity - that is, projects available today are the same as those available in the past. In this framework, we prove that the absence of arbitrage opportunities is equivalent to the existence of a discount rate such that the net value is equal to zero otherwise. Our result allows for an infinite number of projects and for continuous as well as discrete cash flows, generalizing similar results established by Cantor et lippman (1983,1995) and Andler and gales (1997) in a discrete time framework and for a finite number of project.

Keywords: Investment, short sales constraint, stationnary, arbitrage, radon measure, Laplace transform.

JEL Classification: E22, E29, E44, G10, G11

Suggested Citation

Jouini, Elyes and Carassus, Laurence, Investment and Arbitrage Opportunities with Short Sales Constraints. Mathematical Finance, Vol. 8, No. 3, pp. 169-178, 2007. Available at SSRN: https://ssrn.com/abstract=1007220

Elyes Jouini (Contact Author)

Univ. Paris Dauphine - CEREMADE ( email )

Place du Marechal de Lattre de Tassigny
Paris Cedex 16, 75775
France
+ 33 1 44 05 46 75 (Phone)
+ 33 1 44 05 45 99 (Fax)

Laurence Carassus

Université Paris VII Denis Diderot ( email )

2, place Jussieu
Paris, 75005
France

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