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No arbitrage conditions for simple trading strategies

Author

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  • Erhan Bayraktar

    ()

  • Hasanjan Sayit

    ()

Abstract

Strict local martingales may admit arbitrage opportunities with respect to the class of simple trading strategies. (Since there is no possibility of using doubling strategies in this framework, the losses are not assumed to be bounded from below.) We show that for a class of non-negative strict local martingales, the strong Markov property implies the no arbitrage property with respect to the class of simple trading strategies. This result can be seen as a generalization of a similar result on three dimensional Bessel process in [3]. We also pro- vide no arbitrage conditions for stochastic processes within the class of simple trading strategies with shortsale restriction.
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Suggested Citation

  • Erhan Bayraktar & Hasanjan Sayit, 2010. "No arbitrage conditions for simple trading strategies," Annals of Finance, Springer, vol. 6(1), pages 147-156, January.
  • Handle: RePEc:kap:annfin:v:6:y:2010:i:1:p:147-156
    DOI: 10.1007/s10436-009-0120-3
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    File URL: http://hdl.handle.net/10.1007/s10436-009-0120-3
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    Cited by:

    1. Erhan Bayraktar & Hasanjan Sayit, 2010. "On the stickiness property," Quantitative Finance, Taylor & Francis Journals, vol. 10(10), pages 1109-1112.
    2. Erhan Bayraktar & Mikko S. Pakkanen & Hasanjan Sayit, 2009. "On the Existence of Consistent Price Systems," Papers 0911.3789, arXiv.org, revised Jun 2013.
    3. Kardaras, Constantinos & Platen, Eckhard, 2011. "On the semimartingale property of discounted asset-price processes," Stochastic Processes and their Applications, Elsevier, vol. 121(11), pages 2678-2691, November.
    4. Hasanjan Sayit, 2013. "Absence of arbitrage in a general framework," Annals of Finance, Springer, vol. 9(4), pages 611-624, November.
    5. Christian Bender, 2012. "Simple arbitrage," Papers 1210.5391, arXiv.org.

    More about this item

    Keywords

    Simple trading strategies; Arbitrage; Sticky processes; Shortsales restriction; G10;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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