On long-term arbitrage opportunities in Markovian models of financial markets

Martin Mbele Bidima () and Miklos Rasonyi ()

Annals of Operations Research, 2012, vol. 200, issue 1, 146 pages

Abstract: A discrete-time infinite horizon stock market model is considered where the logarithm of the price is assumed to be a Markov chain arising from the time-discretization of a stochastic differential equation. Conditions are given which ensure that there exist investment strategies producing an exponential growth of wealth with a probability converging to 1. The rate of this convergence is studied using large deviation techniques. Copyright Springer Science+Business Media, LLC 2012

Keywords: Asymptotic arbitrage; Large deviations; Markov chains; Loss probability (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/s10479-011-0892-5

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