A Simple Counterexample to Several Problems in the Theory of Asset Pricing

We construct a continuous bounded stochastic process ("S" t ,)" 1E[0,1] " which admits an equivalent martingale measure but such that the minimal martingale measure in the sense of Follmer and Schweizer does not exist. This example also answers (negatively) a problem posed by Karatzas, Lehozcky, and Shreve as well as a problem posed by Strieker. Copyright 1993 Blackwell Publishers.

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