A note on markets with semi-static trading strategies
Miklós Rásonyi
Abstract
We investigate arbitrage in a discrete-time financial market model where, in addition to finitely many dynamically traded assets, there are also static options to choose from. We introduce the concept of small cones of random variables and present a sufficient condition for the attainable positions in the market to be closed in probability. A fundamental theorem of asset pricing is shown in the present context. Utility maximization will also be considered. We will provide economically meaningful examples of infinite dimensional small cones to demonstrate the pertinence of our approach.
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