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Statistical arbitrage with default and collateral

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  • Fajardo, José
  • Lacerda, Ana

Abstract

This paper studies the implications of the absence of statistical arbitrage opportunities in a two-period incomplete market economy where default is allowed but there are collateral requirements. Modified versions of the fundamental theorem of asset pricing are obtained.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 108 (2010)
Issue (Month): 1 (July)
Pages: 81-84

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Handle: RePEc:eee:ecolet:v:108:y:2010:i:1:p:81-84

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Collateral Statistical arbitrage Default;

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References

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  1. Fajardo, J., 2004. "A Note On Arbitrage and Exogenus Collateral," Finance Lab Working Papers flwp_62, Finance Lab, Insper Instituto de Ensino e Pesquisa.
  2. Oleg Bondarenko, 2003. "Statistical Arbitrage and Securities Prices," Review of Financial Studies, Society for Financial Studies, vol. 16(3), pages 875-919, July.
  3. Esteves, Rui Pedro & Reis, Jaime & Ferramosca, Fabiano, 2009. "Market Integration in the Golden Periphery. The Lisbon/London Exchange, 1854-1891," Explorations in Economic History, Elsevier, vol. 46(3), pages 324-345, July.
  4. Aloisio Araujo & M�rio Rui P�scoa & Juan Pablo Torres-Mart�nez, 2002. "Collateral Avoids Ponzi Schemes in Incomplete Markets," Econometrica, Econometric Society, vol. 70(4), pages 1613-1638, July.
  5. Orrillo, Jaime, 2005. "Collateral once again," Economics Letters, Elsevier, vol. 87(1), pages 27-33, April.
  6. Matos, Joao Amaro de & Lacerda, Ana, 2006. "Dry Markets and Statistical Arbitrage Bounds for European Derivatives," FEUNL Working Paper Series wp479, Universidade Nova de Lisboa, Faculdade de Economia.
  7. Araujo, Aloisio. & Fajardo, J. & Páscoa. M. R., 2004. "Endogenous Collateral," Finance Lab Working Papers flwp_68, Finance Lab, Insper Instituto de Ensino e Pesquisa.
  8. Felix Kubler & Karl Schmedders, 2003. "Stationary Equilibria in Asset-Pricing Models with Incomplete Markets and Collateral," Econometrica, Econometric Society, vol. 71(6), pages 1767-1793, November.
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Cited by:
  1. José Fajardo, 2010. "Behavioral arbitrage with collateral and uncertain deliveries," Annals of Finance, Springer, vol. 6(2), pages 241-254, March.

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