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The Fundamental Theorems of Prevision and Asset Pricing

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posted on 2007-04-12, 00:00 authored by Mark J. Schervish, Teddy Seidenfeld, Joseph B. Kadane

We explore two connections between the concepts of coherence, as defined by de Finetti, and arbitrage-free asset pricing in financial markets. We contrast these concepts when random quantities may be unbounded. And we discuss some of the consequences for arbitrage theory when coherent previsions are merely finitely (but not countably) additive.

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Publisher Statement

This is the author’s version of a work that was accepted for publication. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version is available at http://dx.doi.org/10.1016/j.ijar.2007.06.012

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2007-04-12

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