Consistent pricing process

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A consistent pricing process (CPP) $Z=(Z_{t})_{t=0}^{T}$ in a market with d-assets is an adapted process in $\mathbb {R} ^{d}$ if Z is a martingale with respect to the physical probability measure $P$ , and if $Z_{t}\in K_{t}^{*}\backslash \{0\}\forall t$ such that $K_{t}$ is the solvency cone for the market at time $t$ .^[1]

The CPP plays the role of an equivalent martingale measure in markets with transaction costs. In particular, there exists a 1-to-1 correspondence between the CPP $Z$ and the EMM $Q$ .

References

^ Schachermayer, Walter (November 15, 2002). "The Fundamental Theorem of Asset Pricing under Proportional Transaction Costs in Finite Discrete Time". {{cite journal}}: Cite journal requires |journal= (help)

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[1] Schachermayer, Walter (November 15, 2002). "The Fundamental Theorem of Asset Pricing under Proportional Transaction Costs in Finite Discrete Time". {{cite journal}}: Cite journal requires |journal= (help)

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