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No-Arbitrage Symmetries

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  • I. L. Degano
  • S. E. Ferrando
  • A. L. Gonzalez

Abstract

The no-arbitrage property is widely accepted to be a centerpiece of modern financial mathematics and could be considered to be a financial law applicable to a large class of (idealized) markets. The paper addresses the following basic question: can one characterize the class of transformations that leave the law of no-arbitrage invariant? We provide a geometric formalization of this question in a non probabilistic setting of discrete time, the so-called trajectorial models. The paper then characterizes, in a local sense, the no-arbitrage symmetries and illustrates their meaning in a detailed example. Our context makes the result available to the stochastic setting as a special case

Suggested Citation

  • I. L. Degano & S. E. Ferrando & A. L. Gonzalez, 2020. "No-Arbitrage Symmetries," Papers 2008.06184, arXiv.org.
    • Handle: RePEc:arx:papers:2008.06184
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    References listed on IDEAS

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    3. Kamara, Avraham & Miller, Thomas W., 1995. "Daily and Intradaily Tests of European Put-Call Parity," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(4), pages 519-539, December.
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