We investigate the arbitrage-free property of stock price models where the local martingale component is based on an ergodic diffusion with a specified stationary distribution. These models are particularly useful for long horizon asset-liability management as they allow the modelling of long term stock returns with heavy tail ergodic diffusions, with tractable, time homogeneous dynamics, and w...

This paper develops the concept of corporate strategy as a process of arbitrage between markets where asymmetries are exploited by corporate managers. From a development position, this article argues that arbitrage is possible when encountering price asymmetries where there is a technical opportunity to realize arbitrage. Examples are taken from Russian forestry, construction and mining and car...

In this article we propose a generalisation of the recent work of Gatheral-Jacquier [11] on explicit arbitrage-free parameterisations of implied volatility surfaces. We also discuss extensively the notion of arbitrage freeness and Roger Lee’s moment formula using the recent analysis by Roper [18]. We further exhibit an arbitrage-free volatility surface different from Gatheral’s SVI parameterisa...

une controverse s'est élevée en droit et pratique judiciaire iranienne sur la question du dessaisissement du juge en cas d'une clause d'arbitrage international. en fait, le problème est résolu lorsqu'il s'agit d'un arbitrage interne par application de l'article 454 du code de procédure civile lequel permet aux parties de soumettre leur différend ne ou a naître...

Shleifer and Vishny (1997) argue that arbitrage can be both costly and risky. As a result, arbitrageurs will not exploit arbitrage opportunities if the costs and risk of arbitrage exceed its benefits, thereby allowing mispricing to survive for long periods of time. Frankel and Lee (1998) document that the fundamental value-to-price (Vf/P) ratio predicts future abnormal returns for up to three y...

This paper examines the impact of arbitrage costs on the level and duration of the disparity between price and accounting information about firm value. Arbitrage costs are expected to increase the disparity between price and value. However, by increasing the potential rewards to the arbitrageur, arbitrage costs may not necessarily impede the longer-term convergence of price to value. I use the ...

This paper investigates the presence and characteristics of arbitrage opportunities in the foreign exchange market using a unique data set for three major capital and foreign exchange markets that covers a period of more than seven months at tick frequency, obtained from Reuters on special order. We provide evidence on the frequency, size and duration of round-trip and one-way arbitrage opportu...

This paper introduces the concept of statistical arbitrage, a long horizon trading opportunity that generates a riskless profit and is designed to exploit persistent anomalies. Statistical arbitrage circumvents the joint hypothesis dilemma of traditional market efficiency tests because its definition is independent of any equilibrium model and its existence is incompatible with market efficienc...

We develop a model of financially constrained arbitrage, and use it to study the dynamics of arbitrage capital, liquidity, and asset prices. Arbitrageurs exploit price discrepancies between assets traded in segmented markets, and in doing so provide liquidity to investors. A collateral constraint limits their positions as a function of capital. We show that the dynamics of arbitrage activity ar...

Abstract. We construct a binary market model with memory that approximates a continuous-time market model driven by a Gaussian process equivalent to Brownian motion. We give a sufficient conditions for the binary market to be arbitrage-free. In a case when arbitrage opportunities exist, we present the rate at which the arbitrage probability tends to zero as the number of periods goes to infinity.