Maximal Arbitrage

Arbeitspapier

Let S=(S_t), t=0,1,...,T (T being finite), be an adapted R^d-valued process. Each component process of S might be interpreted as the price process of a certain security. A trading strategy H=(H_t), t= 1,...,T, is a predictable R^d-valued process. A strategy H is called extreme if it represents a maximal arbitrage opportunity. By this we mean that H generates at time T a nonnegative portfolio value which is positive with maximal probability. Let $F^e$ denote the set of all states of the world at which the portfolio value at time T, generated by an extreme strategy (which is shown to exist), is equal to zero. We characterize those subsets of F^e, on which no arbitrage opportunities exist.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bonn Econ Discussion Papers ; No. 9/2002

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Market Structure, Pricing, and Design: General ; Contingent Pricing; Futures Pricing; option pricing
• Subject: Arbitrage ; martingale measure ; Arbitrage Pricing ; Martingale ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Schürger, Klaus
• Event: Veröffentlichung
• (who): University of Bonn, Bonn Graduate School of Economics (BGSE)
• (where): Bonn
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/22821
• Last update: 10.03.2025, 11:43 AM CET