No arbitrage and lead-lag relationships
Takaki Hayashi and
Papers from arXiv.org
The existence of time-lagged cross-correlations between the returns of a pair of assets, which is known as the lead-lag relationship, is a well-known stylized fact in financial econometrics. Recently some continuous-time models have been proposed to take account of the lead-lag relationship. Such a model does not follow a semimartingale as long as the lead-lag relationship is present, so it admits an arbitrage without market frictions. In this paper we show that they are free of arbitrage if we take account of market frictions such as the presence of minimal waiting time on subsequent transactions or transaction costs.
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
http://arxiv.org/pdf/1712.09854 Latest version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1712.09854
Access Statistics for this paper
More papers in Papers from arXiv.org
Series data maintained by arXiv administrators ().