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Investment and arbitrage opportunities with short sales constraints

Author

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  • Elyès Jouini

    (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Laurence Carassus

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 avalaible in the past. In this framework, we prove that the absence of arbitrage opportunities is equivalent tto 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 frameworkand for a finite number of project.

Suggested Citation

  • Elyès Jouini & Laurence Carassus, 1998. "Investment and arbitrage opportunities with short sales constraints," Post-Print halshs-00167140, HAL.
    • Handle: RePEc:hal:journl:halshs-00167140
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    Cited by:

    1. Carassus, Laurence & Jouini, Elyes, 2000. "A discrete stochastic model for investment with an application to the transaction costs case," Journal of Mathematical Economics, Elsevier, vol. 33(1), pages 57-80, February.
    2. Elyès Jouini, 2003. "Market imperfections , equilibrium and arbitrage," Post-Print halshs-00167131, HAL.
    3. Jouini, Elyes, 2001. "Arbitrage and control problems in finance: A presentation," Journal of Mathematical Economics, Elsevier, vol. 35(2), pages 167-183, April.
    4. David M. Schizer & Michael R. Powers & Martin Shubik, 2003. "Market Bubbles and Wasteful Avoidance: Tax and Regulatory Constraints on Short Sales," Yale School of Management Working Papers ysm356, Yale School of Management.
    5. Alet Roux, 2007. "The fundamental theorem of asset pricing under proportional transaction costs," Papers 0710.2758, arXiv.org.
    6. Napp, Clotilde, 2001. "Pricing issues with investment flows Applications to market models with frictions," Journal of Mathematical Economics, Elsevier, vol. 35(3), pages 383-408, June.
    7. repec:dau:papers:123456789/5590 is not listed on IDEAS

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