Related papers: No Arbitrage Conditions For Simple Trading Strateg…
In this paper an arbitrage strategy is constructed for the modified Black-Scholes model driven by fractional Brownian motion or by a time changed fractional Brownian motion, when the volatility is stochastic. This latter property allows the…
This paper deals with asset price bubbles modeled by strict local martingales. With any strict local martingale, one can associate a new measure, which is studied in detail in the first part of the paper. In the second part, we determine…
We study the arbitrage opportunities in the presence of transaction costs in a sequence of binary markets approximating the fractional Black-Scholes model. This approximating sequence was constructed by Sottinen and named fractional binary…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
In this study, we consider the asset pricing under model uncertainty with discrete time and states structure. For the single-period securities model, we give a novel definition of arbitrage under a family of probability, and explore of its…
This short note provides a systematic construction of market models without unbounded profits but with arbitrage opportunities.
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…
In the context of a general continuous financial market model, we study whether the additional information associated with an honest time gives rise to arbitrage profits. By relying on the theory of progressive enlargement of filtrations,…
In this paper, we provide a model-independent extension of the paradigm of dynamic hedging of derivative claims. We relate model-independent replication strategies to local martingales having a closed form which we can characterise via…
Supermartingales are here defined on a non-probabilistic setting and can be interpreted solely in terms of superhedging operations. The classical expectation operator is replaced by a pair of subadditive operators one of them providing a…
We consider a generic market model with a single stock and with random volatility. We assume that there is a number of tradable options for that stock with different strike prices. The paper states the problem of finding a pricing rule that…
Opportunities for stochastic arbitrage in an options market arise when it is possible to construct a portfolio of options which provides a positive option premium and which, when combined with a direct investment in the underlying asset,…
Generalized statistical arbitrage concepts are introduced corresponding to trading strategies which yield positive gains on average in a class of scenarios rather than almost surely. The relevant scenarios or market states are specified via…
In this paper, a new approach for solving the problems of pricing and hedging derivatives is introduced in a general frictionless market setting. The method is applicable even in cases where an equivalent local martingale measure fails to…
Double no-touch options, contracts which pay out a fixed amount provided an underlying asset remains within a given interval, are commonly traded, particularly in FX markets. In this work, we establish model-free bounds on the price of…
We present an approach, based on deep neural networks, that allows identifying robust statistical arbitrage strategies in financial markets. Robust statistical arbitrage strategies refer to trading strategies that enable profitable trading…
A financial market model with general semimartingale asset-price processes and where agents can only trade using no-short-sales strategies is considered. We show that wealth processes using continuous trading can be approximated very…
We use the abstract method of (local) martingale problems in order to give criteria for convergence of stochastic processes. Extending previous notions, the formulation we use is neither restricted to Markov processes (or semimartingales),…
In frictionless financial markets, no-arbitrage is a local property in time. This means that a discrete time model is arbitrage-free if and only if there does not exist a one-period-arbitrage. With capital gains taxes, this equivalence…
Statistical arbitrage is a prevalent trading strategy which takes advantage of mean reverse property of spread of paired stocks. Studies on this strategy often rely heavily on model assumption. In this study, we introduce an innovative…