On arbitrages arising from honest times
AbstractIn the context of a general continuous financial market model, we study whether the additional information associated with an honest time gives rise to arbitrage profits. By relying on the theory of progressive enlargement of filtrations, we explicitly show that no kind of arbitrage profit can ever be realised strictly before an honest time, while classical arbitrage opportunities can be realised exactly at an honest time as well as after an honest time. Moreover, stronger arbitrages of the first kind can only be obtained by trading as soon as an honest time occurs. We carefully study the behavior of local martingale deflators and consider no-arbitrage-type conditions weaker than NFLVR.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1207.1759.
Date of creation: Jul 2012
Date of revision: Jul 2013
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
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