Related papers: Characterization of arbitrage-free markets
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
Motivated by applications to bond markets, we propose a multivariate framework for discrete time financial markets with proportional transaction costs and a countable infinite number of tradable assets. We show that the no-arbitrage of…
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 consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
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…
We show that the lack of arbitrage in a model with both fixed and proportional transaction costs is equivalent to the existence of a family of absolutely continuous single-step probability measures, together with an adapted process with…
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…
This paper gives a complete characterization of infinitely divisible semimartingales, i.e., semimartingales whose finite dimensional distributions are infinitely divisible. An explicit and essentially unique decomposition of such…
We construct and study market models admitting optimal arbitrage. We say that a model admits optimal arbitrage if it is possible, in a zero-interest rate setting, starting with an initial wealth of 1 and using only positive portfolios, to…
We prove the existence of quasi-left continuous semimartingales with continuous local semimartingale characteristics which satisfy a Lyapunov-type or a linear growth condition, where latter takes the whole history of the paths into…
Within a general semimartingale framework, we study the relationship between collective market efficiency and individual rationality. We derive a necessary and sufficient condition for the existence of (possibly zero-sum) exchanges among…
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,…
Given a finite honest time, we first show that the associated Az\'ema optional supermartingale can be expressed as the drawdown and the relative drawdown of some local optional supermartingales with continuous running supremum. The relative…
We introduce and discuss a general criterion for the derivative pricing in the general situation of incomplete markets, we refer to it as the No Almost Sure Arbitrage Principle. This approach is based on the theory of optimal strategy in…
We consider a market with a term structure of credit risky bonds in the single-name case. We aim at minimal assumptions extending existing results in this direction: first, the random field of forward rates is driven by a general…
Invariance times are stopping times $\tau$ such that local martingales with respect to some reduced filtration and an equivalently changed probability measure, stopped before $\tau$ , are local martingales with respect to the original model…
A supermartingale deflator (resp., local martingale deflator) multiplicatively transforms nonnegative wealth processes into supermartingales (resp., local martingales). The supermartingale numeraire (resp., local martingale numeraire) is…
We consider the fundamental theorem of asset pricing (FTAP) and hedging prices of options under non-dominated model uncertainty and portfolio constrains in discrete time. We first show that no arbitrage holds if and only if there exists…
We provide a simple explicit estimator for discretely observed Barndorff-Nielsen and Shephard models, prove rigorously consistency and asymptotic normality based on the single assumption that all moments of the stationary distribution of…