Fundamental Theorem of Asset Pricing under Transaction costs and Model uncertainty

Abstract: We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly non-dominated. Using a backward-forward scheme, we show that when the market consists of a money market account and a single stock, no-arbitrage in a quasi-sure sense is equivalent to the existence of a suitable family of consistent price systems. We also show that when the market consists of multiple dynamically traded assets and satisfies \emph{efficient friction}, strict no-arbitrage in a quasi-sure sense is equivalent to the existence of a suitable family of strictly consistent price systems.