Solution

ID: past-exam-of-the-mathematics-course-of-the-university-of-cambridge/2024/iii/paper-211/1/c/solution

The fundamental theorem of asset pricing says, in this discrete-time formulation, that the market has no arbitrage if and only if it admits a strictly positive martingale deflator. Under a chosen positive numeraire this is equivalent to the existence of an equivalent martingale measure for numeraire-discounted gains.

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