A note on asymptotic exponential arbitrage with exponentially decaying failure probability

DOI10.1239/JAP/1378401237zbMATH Open1286.91124arXiv1207.6281OpenAlexW2031688509MaRDI QIDQ2854082FDOQ2854082

Authors: Kai Du, Ariel Neufeld 

Publication date: 17 October 2013

Published in: Journal of Applied Probability (Search for Journal in Brave)

Abstract: The goal of this paper is to prove a result conjectured in F"ollmer and Schachermayer [FS07], even in slightly more general form. Suppose that S is a continuous semimartingale and satisfies a large deviations estimate; this is a particular growth condition on the mean-variance tradeoff process of S. We show that S then allows asymptotic exponential arbitrage with exponentially decaying failure probability, which is a strong and quantitative form of long-term arbitrage. In contrast to F"ollmer and Schachermayer [FS07], our result does not assume that S is a diffusion, nor does it need any ergodicity assumption.

Full work available at URL: https://arxiv.org/abs/1207.6281

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zbMATH Keywords

large deviationscontinuous semimartingale modelasymptotic exponential arbitrage

Mathematics Subject Classification ID

Large deviations (60F10) Portfolio theory (91G10) Martingales with continuous parameter (60G44) Applications of stochastic analysis (to PDEs, etc.) (60H30)

Cites Work

• Title not available (Why is that?)
• Title not available (Why is that?)
• On the minimal martingale measure and the möllmer-schweizer decomposition
• Asymptotic arbitrage and large deviations
• On long-term arbitrage opportunities in Markovian models of financial markets

Cited In (3)

• Asymptotic exponential arbitrage in the Schwartz commodity futures model
• Time-consistent asymptotic exponential arbitrage with small probable maximum loss
• Asymptotic exponential arbitrage and utility-based asymptotic arbitrage in Markovian models of financial markets

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