Finite Period Financial Models
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We now expand our discussion to a multi-period economy with finite status. This setting models trading in the real world quite well, where we always only deal with finite number of transactions and finite number of possible scenarios. On the technical side, both payoffs and trading strategies are still belonging to finite dimensional vector spaces. The first three sections show that the key results in one period economy also hold in the more general setting of a multi-period economy. Section 3.4 discusses super and sub-hedging from the perspective of duality. Section 3.5 discusses how to model the more practical financial markets with bid and ask spreads.