Author: Klein, Irene

Source: Mathematical Finance, Volume 16, Number 3, July 2006 , pp. 583-588(6)

Publisher: Wiley-Blackwell

Abstract:

Frittelli (2004) introduced a market free lunch depending on the preferences of the agents in the market. He characterized no arbitrage and no free lunch with vanishing risk in terms of no market free lunch (the difference comes from the class of utility functions determining the market free lunch). In this note we complete the list of characterizations and show directly (using the theory of Orlicz spaces) that no free lunch is equivalent to the absence of market free lunch with respect to monotone concave utility functions.

Keywords: arbitrage; free lunch; free lunch with vanishing risk; equivalent martingale measure; fundamental theorem of asset pricing; utility maximization; market free lunch

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-9965.2006.00284.x

Affiliations: 1: Institute of Statistics and Decision Support Systems, University of Vienna

Publication date: 2006-07-01

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