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The Timing of Arbitrage: An Option Approach

Author

Listed:
  • Lambrecht, B.

Abstract

The Paper presents a continuous-time model for the timing of riskless arbitrage when the mispricing between two equivalent portfolios varies stochastically through time under the exogenous impact of liquidity trades and persistent prospect that the arbitrage bubble can 'burst' .

Suggested Citation

  • Lambrecht, B., 1996. "The Timing of Arbitrage: An Option Approach," Cambridge Working Papers in Economics 9606, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:9606
    as

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    More about this item

    Keywords

    RISK; STOCK MARKET;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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