Arbitrage in stationary markets |
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Authors: | Igor Evstigneev Dhruv Kapoor |
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Institution: | (1) Economics Department, University of Manchester, Oxford Road, Manchester, M13 9PL, UK |
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Abstract: | We analyse questions of arbitrage in financial markets in which asset prices change in time as stationary stochastic processes.
The main focus of the paper is on a model where the price vectors are independent and identically distributed. In the framework
of this model, we find conditions that are necessary and sufficient for the absence of arbitrage opportunities. We discuss
the relations between the results obtained and the phenomenon of “volatility-induced growth” in stationary markets.
Financial support by the Swiss National Center of Competence in Research “Financial Valuation and Risk Management” (NCCR FINRISK)
is gratefully acknowledged. |
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Keywords: | Stationary markets Arbitrage Volatility-induced growth |
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