On the semimartingale property of discounted asset-price processes

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Journal article
Stochastic Processes and their Applications, 2011, 121 (11), pp. 2678 - 2691
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A financial market model where agents trade using realistic combinations of simple (i.e., finite combinations of buy-and-hold) no-short-sales strategies is considered. Minimal assumptions are made on the discounted asset-price process in particular, the semimartingale property is not assumed. Via a natural market viability assumption, namely, absence of arbitrage of the first kind, we establish that discounted asset-prices have to be semimartingales. Our main result can also be regarded as reminiscent of the Fundamental Theorem of Asset Pricing. © 2011 Elsevier B.V. All rights reserved.
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