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A Systematic Approach to Constructing Market Models With Arbitrage

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  • Johannes Ruf
  • Wolfgang Runggaldier

Abstract

This short note provides a systematic construction of market models without unbounded profits but with arbitrage opportunities.

Suggested Citation

  • Johannes Ruf & Wolfgang Runggaldier, 2013. "A Systematic Approach to Constructing Market Models With Arbitrage," Papers 1309.1988, arXiv.org, revised Dec 2013.
    • Handle: RePEc:arx:papers:1309.1988
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    File URL: http://arxiv.org/pdf/1309.1988
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    References listed on IDEAS

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    1. Hardy Hulley, 2010. "The Economic Plausibility of Strict Local Martingales in Financial Modelling," Research Paper Series 279, Quantitative Finance Research Centre, University of Technology, Sydney.
    2. Philip Protter, 2013. "Strict Local Martingales with Jumps," Papers 1307.2436, arXiv.org, revised Mar 2014.
    3. Eckhard Platen, 2006. "A Benchmark Approach To Finance," Mathematical Finance, Wiley Blackwell, vol. 16(1), pages 131-151, January.
    4. Jörg Osterrieder & Thorsten Rheinländer, 2006. "Arbitrage Opportunities in Diverse Markets via a Non-equivalent Measure Change," Annals of Finance, Springer, vol. 2(3), pages 287-301, July.
    5. Robert A. Jarrow, 2015. "Asset Price Bubbles," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 201-218, December.
    6. 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.
    7. Peter Carr & Travis Fisher & Johannes Ruf, 2014. "On the hedging of options on exploding exchange rates," Finance and Stochastics, Springer, vol. 18(1), pages 115-144, January.
    8. Daniel Fernholz & Ioannis Karatzas, 2010. "On optimal arbitrage," Papers 1010.4987, arXiv.org.
    9. Kreps, David M., 1981. "Arbitrage and equilibrium in economies with infinitely many commodities," Journal of Mathematical Economics, Elsevier, vol. 8(1), pages 15-35, March.
    10. Peter Imkeller & Nicolas Perkowski, 2011. "The Existence of Dominating Local Martingale Measures," Papers 1111.3885, arXiv.org, revised Mar 2013.
    11. Claudio Fontana & Monique Jeanblanc & Shiqi Song, 2012. "On arbitrages arising from honest times," Papers 1207.1759, arXiv.org, revised Jul 2013.
    12. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June.
    13. Shiqi Song, 2013. "An alternative proof of a result of Takaoka," Papers 1306.1062, arXiv.org.
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    Cited by:

    1. Alexander Vervuurt, 2015. "Topics in Stochastic Portfolio Theory," Papers 1504.02988, arXiv.org.
    2. Claudio Fontana, 2013. "No-arbitrage conditions and absolutely continuous changes of measure," Papers 1312.4296, arXiv.org, revised Mar 2014.
    3. Delia Coculescu & Aditi Dandapani, 2020. "Insiders and their Free Lunches: the Role of Short Positions," Papers 2012.00359, arXiv.org, revised Jan 2022.
    4. Huy N. Chau & Peter Tankov, 2013. "Market models with optimal arbitrage," Papers 1312.4979, arXiv.org.
    5. Erhan Bayraktar & Xiang Yu, 2018. "On the market viability under proportional transaction costs," Mathematical Finance, Wiley Blackwell, vol. 28(3), pages 800-838, July.

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