earticle

영어

The fundamental theorem of asset pricing (FTAP) is built on the commonsense principle that asset pricing rules assign null cost to the null contingent income. The zero-incomezero- cost (ZIZC) principle is inherently fulfilled when arbitrage pricing rules are either linear or sublinear. This principle is also taken for granted in the literature which examines convex pricing rules as a viable form of valuation. It is illustrated, however, that the ZIZC principle does not hold in equilibrium of markets where progressive taxation leads to convex pricing rules. Thus, well-known notions of arbitrage provide limited explanatory power for asset pricing in the case where nonlinear net returns prevail due to market frictions. This paper presents a ‘right’ form of the FTAP based on a new notion of arbitrage which is characterized by the asymptotic behavior of marginal net returns. Remarkably, the new no-arbitrage condition leads to sublinear pricing rules under nonproportional net return schedules. Consequently, the result of the paper is a generalization of the FTAP of the literature to the case where return-related market frictions make the net return schedule nonlinear.