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Arbitrage-Free Price-Update and Price-Impact Functions

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  • Werner Stanzl
  • Gur Huberman

Abstract

Consider a trading environment where trading volume affects security prices. We show that when the price impact is time stationary, only linear price-impact functions rule out arbitrage. This is true whether a single asset or a portfolio of assets is traded. When the temporary and perm

Suggested Citation

  • Werner Stanzl & Gur Huberman, 2000. "Arbitrage-Free Price-Update and Price-Impact Functions," Yale School of Management Working Papers ysm164, Yale School of Management, revised 01 Jan 2001.
    • Handle: RePEc:ysm:wpaper:ysm164
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    References listed on IDEAS

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