In an incomplete market framework, contingent claims are of particular interest since they improve the market efficiency. This paper addresses the problem of market completeness when trading in contingent claims is allowed. We extend recent results by Bajeux and Rochet (1996) in a stochastic...

In a stochastic volatility model, the no-free-lunch assumption does not induce a unique arbitrage price because of market incompleteness. In this paper, we consider a contingent claim on the primitive asset, traded in zero net supply. Given a system of Arrow-Debreu state prices, we provide...

In the stochastic volatility framework of Hull and White (1987), we characterize the so-called Black and Scholes implied volatility as a function of two arguments the ratio of the strike to the underlying asset price and the instantaneous value of the volatility By studying the variation m the...

In this paper we study some foundational issues in the theory of asset pricing with market frictions. We model market frictions by letting the set of marketed contingent claims (the opportunity set) be a convex set, and the pricing rule at which these claims are available be convex. This is the...

In this paper we consider a family of investment projects defined by their deterministic cash flows. We assume stationarity-that is, projects available today are the same as those available in the past. In this framework, we prove that the absence of arbitrage opportunities is equivalent to the...