Consistent pricing process
- Consistent pricing process
-
A consistent pricing process (CPP) is any representation of (frictionless) "prices" of assets in a market. It is a stochastic process in a filtered probability space 
such that at time t the ith component can be thought of as a price for the ith asset.
Mathematically, a CPP 
in a market with d-assets is an adapted process in 
if Z is a martingale with respect to the physical probability measure P, and if 
at all times t such that Kt 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.[2] In particular, there exists a 1-to-1 correspondence between the CPP Z and the EMM Q.[citation needed]
References
- ^ Schachermayer, Walter (November 15, 2002). The Fundamental Theorem of Asset Pricing under Proportional Transaction Costs in Finite Discrete Time.
- ^ Jacka, Saul; Berkaoui, Abdelkarem; Warren, Jon. "No arbitrage and closure results for trading cones with transaction costs". Finance and Stochastics 12 (4): 583–600. doi:10.1007/s00780-008-0075-7.
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