A note on asymptotic exponential arbitrage with exponentially decaying failure probability

DOI10.1239/JAP/1378401237MaRDI QIDQ2854082zbMATH OpenOpenAlexFDO

Authors Kai Du, Ariel Neufeld

Publication date 17 October 2013

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

Full work available at URL https://arxiv.org/abs/1207.6281, https://projecteuclid.org/euclid.jap/1378401237

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)

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.

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Cites work

• scientific article; zbMATH DE number 51724 (Why is no real title available?)
• scientific article; zbMATH DE number 1834045 (Why is no real title available?)
• Asymptotic arbitrage and large deviations
• On long-term arbitrage opportunities in Markovian models of financial markets
• On the minimal martingale measure and the möllmer-schweizer decomposition

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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