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Self-Financing Trading and the Ito-Doeblin Lemma

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  • Chris Kenyon
  • Andrew Green

Abstract

The objective of the note is to remind readers on how self-financing works in Quantitative Finance. The authors have observed continuing uncertainty on this issue which may be because it lies exactly at the intersection of stochastic calculus and finance. The concept of a self-financing trading strategy was originally, and carefully, introduced in (Harrison and Kreps 1979) and expanded very generally in (Harrison and Pliska 1981).

Suggested Citation

  • Chris Kenyon & Andrew Green, 2015. "Self-Financing Trading and the Ito-Doeblin Lemma," Papers 1501.02750, arXiv.org.
    • Handle: RePEc:arx:papers:1501.02750
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    File URL: http://arxiv.org/pdf/1501.02750
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    References listed on IDEAS

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    1. Harrison, J. Michael & Pliska, Stanley R., 1981. "Martingales and stochastic integrals in the theory of continuous trading," Stochastic Processes and their Applications, Elsevier, vol. 11(3), pages 215-260, August.
    2. J. Michael Harrison & Stanley R. Pliska, 1981. "Martingales and Stochastic Integrals in the Theory of Continous Trading," Discussion Papers 454, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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    Cited by:

    1. Alessio Calvelli, 2022. "No-Arbitrage Pricing, Dynamics and Forward Prices of Collateralized Derivatives," Papers 2208.08746, arXiv.org, revised Jun 2024.

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