Department of Economics and Business Economics

Arbitrage without borrowing or short selling?

Research output: Working paperResearch

Standard

Arbitrage without borrowing or short selling? / Pakkanen, Mikko; Lukkarinen, Jani.

Aarhus : Institut for Økonomi, Århus Universitet, 2016.

Research output: Working paperResearch

Harvard

Pakkanen, M & Lukkarinen, J 2016 'Arbitrage without borrowing or short selling?' Institut for Økonomi, Århus Universitet, Aarhus.

APA

Pakkanen, M., & Lukkarinen, J. (2016). Arbitrage without borrowing or short selling? Aarhus: Institut for Økonomi, Århus Universitet. CREATES Research Papers, No. 2016-13

CBE

Pakkanen M, Lukkarinen J. 2016. Arbitrage without borrowing or short selling?. Aarhus: Institut for Økonomi, Århus Universitet.

MLA

Pakkanen, Mikko and Jani Lukkarinen Arbitrage without borrowing or short selling?. Aarhus: Institut for Økonomi, Århus Universitet. (CREATES Research Papers; Journal number 2016-13). 2016., 13 p.

Vancouver

Pakkanen M, Lukkarinen J. Arbitrage without borrowing or short selling? Aarhus: Institut for Økonomi, Århus Universitet. 2016 Apr 27.

Author

Pakkanen, Mikko ; Lukkarinen, Jani. / Arbitrage without borrowing or short selling?. Aarhus : Institut for Økonomi, Århus Universitet, 2016. (CREATES Research Papers; No. 2016-13).

Bibtex

@techreport{894e95bdf2a141b5bfcc854fd85dc3d3,
title = "Arbitrage without borrowing or short selling?",
abstract = "We show that a trader, who starts with no initial wealth and is not allowed to borrow money or short sell assets, is theoretically able to attain positive wealth by continuous trading, provided that she has perfect foresight of future asset prices, given by a continuous semimartingale. Such an arbitrage strategy can be constructed as a process of finite variation that satisfies a seemingly innocuous self-financing condition, formulated using a pathwise Riemann-Stieltjes integral. Our result exemplifies the potential intricacies of formulating economically meaningful self-financing conditions in continuous time, when one leaves the conventional arbitrage-free framework.",
keywords = "Short selling, self-financing condition, arbitrage, Riemann-Stieltjes integral, stochastic integral, semimartingale",
author = "Mikko Pakkanen and Jani Lukkarinen",
year = "2016",
month = "4",
day = "27",
language = "English",
publisher = "Institut for {\O}konomi, {\AA}rhus Universitet",
type = "WorkingPaper",
institution = "Institut for {\O}konomi, {\AA}rhus Universitet",

}

RIS

TY - UNPB

T1 - Arbitrage without borrowing or short selling?

AU - Pakkanen, Mikko

AU - Lukkarinen, Jani

PY - 2016/4/27

Y1 - 2016/4/27

N2 - We show that a trader, who starts with no initial wealth and is not allowed to borrow money or short sell assets, is theoretically able to attain positive wealth by continuous trading, provided that she has perfect foresight of future asset prices, given by a continuous semimartingale. Such an arbitrage strategy can be constructed as a process of finite variation that satisfies a seemingly innocuous self-financing condition, formulated using a pathwise Riemann-Stieltjes integral. Our result exemplifies the potential intricacies of formulating economically meaningful self-financing conditions in continuous time, when one leaves the conventional arbitrage-free framework.

AB - We show that a trader, who starts with no initial wealth and is not allowed to borrow money or short sell assets, is theoretically able to attain positive wealth by continuous trading, provided that she has perfect foresight of future asset prices, given by a continuous semimartingale. Such an arbitrage strategy can be constructed as a process of finite variation that satisfies a seemingly innocuous self-financing condition, formulated using a pathwise Riemann-Stieltjes integral. Our result exemplifies the potential intricacies of formulating economically meaningful self-financing conditions in continuous time, when one leaves the conventional arbitrage-free framework.

KW - Short selling, self-financing condition, arbitrage, Riemann-Stieltjes integral, stochastic integral, semimartingale

M3 - Working paper

BT - Arbitrage without borrowing or short selling?

PB - Institut for Økonomi, Århus Universitet

CY - Aarhus

ER -