In markets with transaction costs, consistent price systems play the same role as martingale measures in frictionless markets. We prove that if a continuous price process has conditional full support, then it admits consistent price systems for arbitrarily small transaction costs. This result applies to a large class of Markovian and non-Markovian models, including geometric fractional Brownian motion.Using the constructed price systems, we show, under very general assumptions, the following "face-lifting" result: the asymptotic superreplication price of a European contingent claim g(ST ) equalŝ g(S0), whereĝ is the concave envelope of g and St is the price of the asset at time t. This theorem generalizes similar results obtained for diffusion processes to processes with conditional full support.
We provide a rate for the strong convergence of Euler approximations for stochastic differential equations (SDEs) whose diffusion coefficient is not Lipschitz but only (1/2 + α)-Hölder continuous for some α ≥ 0.
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