Advanced Search
MyIDEAS: Login

Interest rate paradox

Contents:

Author Info

  • Ivanov, Sergei
Registered author(s):

    Abstract

    Maximization of result from operations with securities is not always ultimate goal of participants. For example, result can be exchanged into different currencies. There can be different utility functions that transform result into some asset. Different risk-neutral probability densities could be derived from one set of option prices by participants using different utility functions. Integral of derived density function must be equal to one. There have to be no such utility function for which this condition is not met. Otherwise, derived function is not a probability density. This allows using of risk-free profitable arbitrage strategies. However it was shown that such utility function almost always exist. It is hard to use on nowadays markets. By this reason such opportunity was called “weak arbitrage”.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://mpra.ub.uni-muenchen.de/47723/
    File Function: original version
    Download Restriction: no

    File URL: http://mpra.ub.uni-muenchen.de/47773/
    File Function: revised version
    Download Restriction: no

    File URL: http://mpra.ub.uni-muenchen.de/47839/
    File Function: revised version
    Download Restriction: no

    File URL: http://mpra.ub.uni-muenchen.de/48296/
    File Function: revised version
    Download Restriction: no

    File URL: http://mpra.ub.uni-muenchen.de/48712/
    File Function: revised version
    Download Restriction: no

    File URL: http://mpra.ub.uni-muenchen.de/48811/
    File Function: revised version
    Download Restriction: no

    File URL: http://mpra.ub.uni-muenchen.de/49187/
    File Function: revised version
    Download Restriction: no

    File URL: http://mpra.ub.uni-muenchen.de/49734/
    File Function: revised version
    Download Restriction: no

    File URL: http://mpra.ub.uni-muenchen.de/53046/
    File Function: revised version
    Download Restriction: no

    File URL: http://mpra.ub.uni-muenchen.de/53919/
    File Function: revised version
    Download Restriction: no

    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 47723.

    as in new window
    Length:
    Date of creation: 20 Jun 2013
    Date of revision:
    Handle: RePEc:pra:mprapa:47723

    Contact details of provider:
    Postal: Schackstr. 4, D-80539 Munich, Germany
    Phone: +49-(0)89-2180-2219
    Fax: +49-(0)89-2180-3900
    Web page: http://mpra.ub.uni-muenchen.de
    More information through EDIRC

    Related research

    Keywords: market efficiency; probability density; interest rate; arbitrage; efficiency conditions;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Andrei Shleifer ad Robert W. Vishny, 1995. "The Limits of Arbitrage," Harvard Institute of Economic Research Working Papers 1725, Harvard - Institute of Economic Research.
    2. Sanford J Grossman & Joseph E Stiglitz, 1997. "On the Impossibility of Informationally Efficient Markets," Levine's Working Paper Archive 1908, David K. Levine.
    3. Oleg Bondarenko, 2003. "Statistical Arbitrage and Securities Prices," Review of Financial Studies, Society for Financial Studies, vol. 16(3), pages 875-919, July.
    4. Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
    5. Lucio Sarno, 2005. "Viewpoint: Towards a solution to the puzzles in exchange rate economics: where do we stand?," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 673-708, August.
    6. Huisman, Ronald & Koedijk, Kees & Kool, Clemens & Nissen, Francois, 1998. "Extreme support for uncovered interest parity," Journal of International Money and Finance, Elsevier, vol. 17(1), pages 211-228, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:47723. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.