The Timing of Arbitrage: An Option Approach

B. Lambrecht

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: The Paper presents a continuous-time model for the timing of riskless arbitrage when the mispricing between two equivalent portfolios varies stochastically through time under the exogenous impact of liquidity trades and persistent prospect that the arbitrage bubble can 'burst' .

Keywords: RISK; STOCK MARKET (search for similar items in EconPapers)
JEL-codes: D82 G12 G13 (search for similar items in EconPapers)
Pages: 37 pages
Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:9606

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