Arbitrage without borrowing or short selling?

Jani Lukkarinen and Mikko S. Pakkanen

Papers from arXiv.org

Abstract: We show that a trader, who starts with no initial wealth and is not allowed to borrow money or short sell assets, is theoretically able to attain positive wealth by continuous trading, provided that she has perfect foresight of future asset prices, given by a continuous semimartingale. Such an arbitrage strategy can be constructed as a process of finite variation that satisfies a seemingly innocuous self-financing condition, formulated using a pathwise Riemann-Stieltjes integral. Our result exemplifies the potential intricacies of formulating economically meaningful self-financing conditions in continuous time, when one leaves the conventional arbitrage-free framework.

Date: 2016-04, Revised 2016-10
New Economics Papers: this item is included in nep-fmk and nep-pr~
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Mathematics and Financial Economics 2017, Vol. 11, No. 3, 263-274

Downloads: (external link)
http://arxiv.org/pdf/1604.07690 Latest version (application/pdf)

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:arx:papers:1604.07690

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().