Statistical Arbitrage with Default and Collateral

José Fajardo ()

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: In this paper we study the implications of the absence of statistical arbitrage opportunities (SAO) in a two-period incomplete market economy where default is allowed but there are collateral requirements. We study the existence of state price deflators and the existence of a solution for the individual optimality problem, obtaining modified versions of the fundamental theorems of asset pricing. Then, we address the existence of equilibrium.

JEL-codes: D52 G11 G12 (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Statistical arbitrage with default and collateral (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w200808

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