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  • Authors: Kardaras, Konstantinos (2005)

  • We study the existence of the numeraire portfolio under predictable convex constraints in a general semimartingale financial model. The numeraire portfolio generates a wealth process which makes the relative wealth processes of all other portfolios with respect to it supermartingales. Necessary and sufficient conditions for the existence of the numeraire portfolio are obtained in terms of the triplet of predictable characteristics of the asset price process. This characterization is then used to obtain further necessary and sufficient conditions, in terms of an arbitrage-type notion. In particular, the full strength of the "No Free Lunch with Vanishing Risk" (NFLVR) is not needed, only the weaker "No Unbounded Profit with Bounded Risk" (NUPBR) condition that involves the boundedness...