Mean-reverting discrete time market models: Speculative opportunities and absence of arbitrage
MetadataShow full item record
In this article we study discrete time mean-reverting market models. We show that certain choices of initial conditions ensure existence of an equivalent martingale measure and absence of arbitrage for any finite time horizon. Further, it is shown that this model still allows some speculative opportunities. These opportunities cannot be expressed in the terms of arbitrage or asymptotic arbitrage. In particular, a gain can be achieved for a wide enough set of expected utilities for a strategy that does not require any hypothesis on market parameters and does not use estimation of these parameters.
Showing items related by title, author, creator and subject.
Dokuchaev, Nikolai (2011)The paper studies arbitrage opportunities and possible speculative opportunities for diffusion mean-reverting market models. It is shown that the Novikov condition is satisfied for any time interval and for any set of ...
Yao, Juan (1998)The primary purpose of this research is to perform an empirical test using Arbitrage Pricing Theory (APT) in order to investigate the relationship between the Chinese stock market performance and domestic economic ...
Liu, Li Xian; Bogomolov, T. (2013)Traditionally, arbitrage refers to simultaneously buying and selling the same financial assets by taking advantage of a price difference in two or more markets. However, the strict sense of arbitrage is hardly obtained ...