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565 A Market Foundation for Conditional Asset Pricing

Number: 566
Year: 2015
Author(s): Simone Cerreia-Vioglio, Fabio Maccheroni, Massimo Marinacci
Hansen and Richard (1987) prove a classic representation theorem for prices of payoffs in a conditional asset market. In this note we study the portfolio formation and portfolio pricing rules that ensure that the prices of payoffs generated by portfolios actually satisfy the assumptions of their representation theorem. In this way, we obtain a fundamental theorem of finance for conditional asset pricing.