Sublinear price functionals under portfolio constraints

We consider a financial market model in discrete time with convex constrain ts on portfolios. We adopt an axiomatic approach of admissible price functi onals which generalizes the familiar linear pricing rules for frictionless markets. We provide a dual representation formula of any admissible price f unctional. This formula is expressed as a supremum of expectation under a s uitable family of probability measures. This result is applied to restrict the (usually too large) super-replication bid-ask spread when the super-rep lication cost functional is not sublinear and otherwise to derive a dual ch aracterization of the super-replication cost. (C) 2000 Elsevier Science S.A . All rights reserved. JEL classification: G12.