How non-arbitrage, viability and num,raire portfolio are related

This paper proposes two approaches that quantify the exact relationship among viability, absence of arbitrage, and/or existence of the num,raire portfolio under minimal assumptions and for general continuous-time market models. Precisely, our first and principal contribution proves the equivalence between the no-unbounded-profit-with-bounded-risk condition (NUPBR hereafter), the existence of the num,raire portfolio, and the existence of the optimal portfolio under an equivalent probability measure for any "nice" utility and positive initial capital. Herein, a "nice" utility is any smooth von Neumann-Morgenstern utility satisfying Inada's conditions and the elasticity assumptions of Kramkov and Schachermayer. Furthermore, the equivalent probability measure-under which the utility maximization problems have solutions-can be chosen as close to the real-world probability measure as we want (but might not be equal). Without changing the underlying probability measure and under mild assumptions, our second contribution proves that NUPBR is equivalent to the "local" existence of the optimal portfolio. This constitutes an alternative to the first contribution, if one insists on working under the real-world probability. These two contributions lead naturally to new types of viability that we call weak and local viabilities.