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Asset pricing with no exogenous probability measure

Cassese, Gianluca

In: Mathematical finance, 2008, vol. 18, no. 1, p. 23-54

In this paper we propose a model of financial markets in which agents have limited ability to trade and no probability is given from the outset. In the absence of arbitrage opportunities, assets are priced according to a probability measure that lacks countable additivity. Despite finite additivity, we obtain an explicit representation of the expected value with respect to the pricing measure,...