New asset pricing theory challenges traditional assumptions, reshaping financial markets.
The article presents a new way to price assets without needing to rely on probabilities. By introducing a continuity property in the state variable, the researchers show that a meaningful theory of asset pricing can still be developed. They find that the pricing functional in an arbitrage-free market can be linked to a full support martingale measure. The study also connects the no arbitrage theory to economic equilibrium and explores hedging of contingent claims using linear programming.