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Stability of no-arbitrage property under model uncertainty

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  • Ostrovski, Vladimir

Abstract

We study the stability of the no-arbitrage property under model uncertainty. We measure model uncertainty with the total variation distance of underlying probability distributions. We show that sufficiently small changes of the underlying probability distribution preserve the no-arbitrage property of the financial market model.

Suggested Citation

  • Ostrovski, Vladimir, 2013. "Stability of no-arbitrage property under model uncertainty," Statistics & Probability Letters, Elsevier, vol. 83(1), pages 89-92.
  • Handle: RePEc:eee:stapro:v:83:y:2013:i:1:p:89-92 DOI: 10.1016/j.spl.2012.08.026
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    References listed on IDEAS

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    1. Shi, Jian & Lau, Tai-Shing, 2000. "Empirical Likelihood for Partially Linear Models," Journal of Multivariate Analysis, Elsevier, vol. 72(1), pages 132-148, January.
    2. Hengjian Cui & Efang Kong, 2006. "Empirical Likelihood Confidence Region for Parameters in Semi-linear Errors-in-Variables Models," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 33(1), pages 153-168.
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