Let S=(S_t), t=0,1,...,T (T being finite), be an adapted R^d-valued process. Each component process of S might be interpreted as the price process of a certain security. A trading strategy H=(H_t), t= 1,...,T, is a predictable R^d-valued process. A strategy H is called extreme if it represents a maximal arbitrage opportunity. By this we mean that H generates at time T a nonnegative portfolio value which is positive with maximal probability. Let $F^e$ denote the set of all states of the world at which the portfolio value at time T, generated by an extreme strategy (which is shown to exist), is equal to zero. We characterize those subsets of F^e, on which no arbitrage opportunities exist.
|Date of creation:||May 2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
When requesting a correction, please mention this item's handle: RePEc:bon:bonedp:bgse9_2002. 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: (BGSE Office)
If references are entirely missing, you can add them using this form.