Related papers: Exploiting arbitrage requires short selling
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…
We show that with suitable restrictions on allowable trading strategies, one has no arbitrage in settings where the traditional theory would admit arbitrage possibilities. In particular, price processes that are not semimartingales are…
We are interested in the existence of equivalent martingale measures and the detection of arbitrage opportunities in markets where several multi-asset derivatives are traded simultaneously. More specifically, we consider a financial market…
Given a stock price process, we analyse the potential of arbitrage by insiders in a context of short-selling prohibitions. We introduce the notion of minimal supermartingale measure, and we analyse its properties in connection to the…
We investigate triangular arbitrage within the spot foreign exchange market using high-frequency executable prices. We show that triangular arbitrage opportunities do exist, but that most have short durations and small magnitudes. We find…
We show that a trader, who starts with no initial wealth and is not allowed to borrow money or short sell assets, is theoretically able to attain positive wealth by continuous trading, provided that she has perfect foresight of future asset…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a…
This short note provides a systematic construction of market models without unbounded profits but with arbitrage opportunities.
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
In a semimartingale financial market model, it is shown that there is equivalence between absence of arbitrage of the first kind (a weak viability condition) and the existence of a strictly positive process that acts as a local martingale…
A financial market model where agents trade using realistic combinations of buy-and-hold strategies is considered. Minimal assumptions are made on the discounted asset-price process - in particular, the semimartingale property is not…
Consider a financial market with nonnegative semimartingales which does not need to have a num\'{e}raire. We are interested in the absence of arbitrage in the sense that no self-financing portfolio gives rise to arbitrage opportunities,…
A constrained informationally efficient market is defined to be one whose price process arises as the outcome of some equilibrium where agents face restrictions on trade. This paper investigates the case of short sale constraints, a setting…
Investors trade shifting prices, portfolio values, and in turn their ability to borrow. Concentrated ownership, high price impact and low collateral requirements are propitious for arbitrage.
We consider the problem of utility maximization for small traders on incomplete financial markets. As opposed to most of the papers dealing with this subject, the investors' trading strategies we allow underly constraints described by…
In this study we prove the existence of statistical arbitrage opportunities in the Black-Scholes framework by considering trading strategies that consists of borrowing from the risk free rate and taking a long position in the stock until it…
Long-term relative arbitrage exists in markets where the excess growth rate of the market portfolio is bounded away from zero. Here it is shown that under a time-homogeneity hypothesis this condition will also imply the existence of…