No Arbitrage Conditions For Simple Trading Strategies

Erhan Bayraktar and Hasanjan Sayit

Papers from arXiv.org

Abstract: Strict local martingales may admit arbitrage opportunities with respect to the class of simple trading strategies. (Since there is no possibility of using doubling strategies in this framework, the losses are not assumed to be bounded from below.) We show that for a class of non-negative strict local martingales, the strong Markov property implies the no arbitrage property with respect to the class of simple trading strategies. This result can be seen as a generalization of a similar result on three dimensional Bessel process in [3]. We also pro- vide no arbitrage conditions for stochastic processes within the class of simple trading strategies with shortsale restriction.

Date: 2008-01, Revised 2009-01
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Citations: View citations in EconPapers (5)

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Journal Article: No arbitrage conditions for simple trading strategies (2010)
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