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How to account for virtual arbitrage in the standard derivative pricing

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  • Kirill Ilinski

Abstract

In this short note we show how virtual arbitrage opportunities can be modelled and included in the standard derivative pricing without changing the general framework.

Suggested Citation

  • Kirill Ilinski, 1999. "How to account for virtual arbitrage in the standard derivative pricing," Papers cond-mat/9902047, arXiv.org.
    • Handle: RePEc:arx:papers:cond-mat/9902047
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    Cited by:

    1. Mauricio Contreras & Rely Pellicer & Daniel Santiagos & Marcelo Villena, 2015. "Calibration and simulation of arbitrage effects in a non-equilibrium quantum Black-Scholes model by using semiclassical methods," Papers 1512.05377, arXiv.org.
    2. Matthias Otto, 1999. "Stochastic relaxational dynamics applied to finance: towards non-equilibrium option pricing theory," Papers cond-mat/9906196, arXiv.org, revised Oct 1999.
    3. Otto, Matthias, 2001. "Finite arbitrage times and the volatility smile?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 299(1), pages 299-304.
    4. Contreras G., Mauricio, 2021. "Endogenous stochastic arbitrage bubbles and the Black–Scholes model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 583(C).
    5. Mauricio Contreras G. & Roberto Ortiz H, 2021. "Three little arbitrage theorems," Papers 2104.10187, arXiv.org.
    6. Mauricio Contreras G, 2020. "Endogenous Stochastic Arbitrage Bubbles and the Black--Scholes model," Papers 2009.09329, arXiv.org.

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