General Financial Market Model Defined by a Liquidation Value Process

32 Pages Posted: 31 May 2014 Last revised: 24 Feb 2015

See all articles by Emmanuel Lepinette

Emmanuel Lepinette

Université Paris-Dauphine - CEREMADE, CNRS

Tuan Tran

Université Paris Dauphine; McMaster University

Date Written: May 30, 2014


We present a general financial market model defined by a liquidation value process. This approach generalizes the conic models of Schachermayer and Kabanov where the transaction costs are proportional to the exchanged volumes of traded assets. This allows to consider financial market models where proportional transaction costs and fixed costs coexist. In this case, the solvency set of all portfolio positions that can be liquidated without any debt is not necessary convex. Therefore, the usual duality principle based on the Hahn-Banach separation theorem is not appropriate to characterize the prices super hedging a contingent claim. We propose an alternative method to price European or American contingent claims under absence of arbitrage opportunity of the second kind.

Suggested Citation

Lepinette, Emmanuel and Tran, Tuan and Tran, Tuan, General Financial Market Model Defined by a Liquidation Value Process (May 30, 2014). Available at SSRN: or

Emmanuel Lepinette (Contact Author)

Université Paris-Dauphine - CEREMADE, CNRS ( email )

Place du Marechal de Lattre de Tassigny
Paris Cedex 16, 75775

Tuan Tran

Université Paris Dauphine ( email )


McMaster University ( email )

1280 Main St W
Hamilton, Ontario L8S 4L8
9055368009 (Phone)
9055368009 (Fax)

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