Tolerance to arbitrage
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The author studies models of a frictionless security market where the prices are continuous processes of bounded \(p\)-variation, \(p\in [1,2)\). Specifically, ``volatility terms of the price processes are fractional Brownian motions with index \(1/2<H<1\), \(1/H<p\). An explicit arbitrage trading strategy is constructed for such a market, based on Hardy's inequalities for \(\alpha \)-order power means of the prices. The result is an extension of the already known fact that price processes of bounded variation (\(p=1\)) admit arbitrage.
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Cites work
- An inequality of the Hölder type, connected with Stieltjes integration
- Arbitrage with Fractional Brownian Motion
- Differential equations driven by rough signals. I: An extension of an inequality of L. C. Young
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- Martingales and stochastic integrals in the theory of continuous trading
- Sample functions of the Gaussian process
Cited in
(30)- A new class of nearly self-financing strategies
- Arbitrage without borrowing or short selling?
- On arbitrage and Markovian short rates in fractional bond markets
- No-arbitrage, leverage and completeness in a fractional volatility model
- On pricing and hedging in financial markets with long-range dependence
- Model-free CPPI
- High-frequency trading with fractional Brownian motion
- A short memory version of the Vasicek model and evaluating European options on zero-coupon bonds
- Consistent price systems and face-lifting pricing under transaction costs
- Stochastic volatility and fractional Brownian motion
- Gaussian moving averages, semimartingales and option pricing.
- A closed-form approximation for the fractional Black-Scholes model with transaction costs
- From market data to agent-based models and stochastic differential equations
- Stochastic volatility and multifractional Brownian motion
- ARBITRAGE IN FRACTAL MODULATED BLACK–SCHOLES MODELS WHEN THE VOLATILITY IS STOCHASTIC
- Donsker Type Theorem for the Rosenblatt Process and a Binary Market Model
- Modelling NASDAQ series by sparse multifractional Brownian motion
- Trading fractional Brownian motion
- On the calibration of fractional two-factor stochastic volatility model with non-Lipschitz diffusions
- A fractional version of the Cox–Ingersoll–Ross interest rate model and pricing double barrier option with Hurst index H∈(23,1)
- Pricing American put option on zero-coupon bond under fractional CIR model with transaction cost
- NO ARBITRAGE UNDER TRANSACTION COSTS, WITH FRACTIONAL BROWNIAN MOTION AND BEYOND
- On the fractional stochastic integration for random non-smooth integrands
- On stochastic calculus related to financial assets without semimartingales
- Rough paths in idealized financial markets
- Quantile hedging in the complete financial market under the mixed fractional Brownian motion model and the liquidity constraint
- Geometric Asian power option pricing with transaction cost under the geometric fractional Brownian motion with w sources of risk in fuzzy environment
- Semigroup theory for pricing currency options driven by fractional Brownian motion
- Semimartingale properties of a generalised fractional Brownian motion and its mixtures with applications in asset pricing
- Discretization of continuous-time arbitrage strategies in financial markets with fractional Brownian motion
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