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Good deals in markets with frictions

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dc.affiliation.dptoUC3M. Departamento de Economía de la Empresaes
dc.contributor.authorBalbás, Alejandro
dc.contributor.authorBalbás, Beatriz
dc.contributor.authorBalbás, Raquel
dc.contributor.editorUniversidad Carlos III de Madrid. Departamento de Economía de la Empresa
dc.date.accessioned2011-02-24T18:13:06Z
dc.date.available2011-02-24T18:13:06Z
dc.date.issued2011-02
dc.description.abstractThis paper studies a portfolio choice problem such that the pricing rule may incorporate transaction costs and the risk measure is coherent and expectation bounded. We will prove the necessity of dealing with pricing rules such that there are essentially bounded stochastic discount factors, which must be also bounded from below by a strictly positive value. Otherwise good deals will be available to traders, i.e., depending on the selected risk measure, investors can build portfolios whose (risk, return) will be as close as desired to (- infinite, + infinite) or (0, infinite). This pathologic property still holds for vector risk measures (i.e., if we minimize a vector valued function whose components are risk measures). It is worthwhile to point out that essentially bounded stochastic discount factors are not usual in financial literature. In particular, the most famous frictionless, complete and arbitrage free pricing models imply the existence of good deals for every coherent and expectation bounded measure of risk, and the incorporation of transaction costs will no guarantee the solution of this caveat
dc.format.mimetypeapplication/octet-stream
dc.format.mimetypeapplication/octet-stream
dc.format.mimetypeapplication/pdf
dc.identifier.repecwb110302
dc.identifier.urihttps://hdl.handle.net/10016/10362
dc.identifier.uxxiDT/0000000921
dc.language.isoeng
dc.relation.hasversionhttp://hdl.handle.net/10016/18157
dc.relation.ispartofseriesUC3M Working papers. Business Economics
dc.relation.ispartofseries11-02
dc.rightsAtribución-NoComercial-SinDerivadas 3.0 España
dc.rights.accessRightsopen access
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.ecienciaEmpresa
dc.subject.jelG12
dc.subject.jelG13
dc.subject.jelG11
dc.subject.otherRisk measure
dc.subject.otherPerfect and imperfect markets
dc.subject.otherStochastic discount factor
dc.subject.otherPortfolio choice model
dc.subject.otherGood deal
dc.titleGood deals in markets with frictions
dc.typeworking paper*
dspace.entity.typePublication
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