We show that Lyons' rough path integral is a natural tool to use in model free financial mathematics by proving that it is possible to make an arbitrarily large profit by investing in those paths which do not have a rough path associated to them. We also show that in certain situations, the rough path integral can be constructed as a limit of Riemann sums, and not just as a limit of compensated Riemann sums which are usually used to define it. This proves that the rough path integral is really an extension of F\"ollmer's pathwise It\^o integral. Moreover, we construct a "model free It\^o integral" in the spirit of Karandikar .
We present two different approaches to stochastic integration in frictionless model free financial mathematics . The first one is in the spirit of It\^o's integral and based on a certain topology which is induced by the outer measure corresponding to the minimal superhedging price. The second one is based on the controlled rough path integral. We prove that every "typical price path" has a naturally associated It\^o rough path, and justify the application of the controlled rough path integral in finance by showing that it is the limit of non-anticipating Riemann sums, a new result in itself. Compared to the first approach, rough paths have the disadvantage of severely restricting the space of integrands, but the advantage of being a Banach space theory. Both approaches are based entirely on financial arguments and do not require any probabilistic structure .
R
show that Lyons' rough path integral is a natural tool to use in
present two different approaches to stochastic integration in frictionless
R
by proving that it is possible to make an arbitrarily large profit by investing in those paths which do not have a
. The first one is in the spirit of It\^o's integral and based on a certain topology which is induced by the outer measure corresponding to the minimal superhedging price. The second one is based on the controlled rough path integral. We prove that every "typical price path" has a naturally associated It\^o rough path, and justify the application of the controlled
D
associated to them. We also show that in certain situations, the rough path
R
can be constructed as a limit of
in finance by showing that it is the limit of non-anticipating
R
and not just as a limit of compensated Riemann sums which are usually used to define it. This proves that the rough path integral is really an extension of F\"ollmer's pathwise It\^o integral. Moreover, we construct a "model free It\^o integral" in the spirit of Karandikar
a new result in itself. Compared to the first approach, rough paths have the disadvantage of severely restricting the space of integrands, but the advantage of being a Banach space theory. Both approaches are based entirely on financial arguments and do not require any probabilistic structure