Deterministic Criteria for the Absence and Existence of Arbitrage in Multi-Dimensional Diffusion Markets
Mathematical Finance
2017-12-22 v5 Probability
Abstract
We derive deterministic criteria for the existence and non-existence of equivalent (local) martingale measures for financial markets driven by multi-dimensional time-inhomogeneous diffusions. Our conditions can be used to construct financial markets in which the \emph{no unbounded profit with bounded risk} condition holds, while the classical \emph{no free lunch with vanishing risk} condition fails.
Keywords
Cite
@article{arxiv.1609.01621,
title = {Deterministic Criteria for the Absence and Existence of Arbitrage in Multi-Dimensional Diffusion Markets},
author = {David Criens},
journal= {arXiv preprint arXiv:1609.01621},
year = {2017}
}
Comments
Forthcoming in "International Journal of Theoretical and Applied Finance"