On arbitrages arising with honest times

Claudio Fontana (), Monique Jeanblanc () and Shiqi Song ()

Finance and Stochastics, 2014, vol. 18, issue 3, 515-543

Abstract: In the context of a general continuous financial market model, we study whether the additional information associated with an honest time τ gives rise to arbitrage profits. By relying on the theory of progressive enlargement of filtrations, we explicitly show that no kind of arbitrage profit can ever be realised strictly before τ, whereas classical arbitrage opportunities can be realised exactly at τ as well as after τ. Moreover, arbitrages of the first kind can only be obtained by starting to trade as soon as τ occurs. We carefully study the behavior of local martingale deflators and consider no-arbitrage-type conditions weaker than no free lunch with vanishing risk. Copyright Springer-Verlag Berlin Heidelberg 2014

Keywords: Honest time; Progressive enlargement of filtrations; Arbitrage; Free lunch with vanishing risk; Local martingale deflator; 60G40; 60G44; 91B44; 91G10; G11; G14 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://hdl.handle.net/10.1007/s00780-014-0231-1 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:finsto:v:18:y:2014:i:3:p:515-543

Ordering information: This journal article can be ordered from
http://www.springer. ... ance/journal/780/PS2

DOI: 10.1007/s00780-014-0231-1

Access Statistics for this article

Finance and Stochastics is currently edited by M. Schweizer

More articles in Finance and Stochastics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().