No-arbitrage theorem for multi-factor uncertain stock model with floating interest rate

Xiaoyu Ji and Hua Ke ()
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Xiaoyu Ji: Renmin University of China
Hua Ke: Tongji University

Fuzzy Optimization and Decision Making, 2017, vol. 16, issue 2, No 5, 234 pages

Abstract: Abstract In the stock models, the prices of the stocks are usually described via some differential equations. So far, uncertain stock model with constant interest rate has been proposed, and a sufficient and necessary condition for it being no-arbitrage has also been derived. This paper considers the multiple risks in the interest rate market and stock market, and proposes a multi-factor uncertain stock model with floating interest rate. A no-arbitrage theorem is derived in the form of determinants, presenting a sufficient and necessary condition for the new stock model being no-arbitrage. In addition, a strategy for the arbitrage is provided when the condition is not satisfied.

Keywords: Finance; Stock model; No-arbitrage principle; Uncertain differential equation (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s10700-016-9246-8

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