The theory of asset pricing, which takes its roots in the Arrow-Debreu model, the Black and Scholes formula, has been famalized in a framework by Harrison and Kreps (1979), harrison and Pliska (1979) and Kreps (1981). In these models, securities markets are assumed to be frictionless. The main result is that a price process is arbitrage free (or, equivalently, compatible with some equilibrium) if and only if it is, when appropriately renormalized, a martingale for some equivalent probability measure. The theory of pricing by arbitrage floows from there. Contingent claims can be priced by taking their expected value with respect to an equivalent martingale measure. If this value is unique, the claim is said to be priced by arbitrage. The new probabilities can be interpreted as state prices or as the intertemporal marginal ratyes of substitution of an agent maximizing his expected utility. In this work, we will propose a general model that takes frictions into account.
