Download This PaperArbitrage in Stationary Markets
12 Pages Posted: 9 Oct 2007
Abstract
We analyse questions of arbitrage in fnancial markets in which asset prices change in time as stationary stochastic processes. The main focus of the paper is on a model where the price vectors are independent and identically distributed. In the framework of this model, we find conditions that are necessary and sufficient for the absence of arbitrage opportunities. We discuss the relations between the results obtained and the phenomenon of volatility-induced growth in stationary markets.
Keywords: Stationary markets, Arbitrage, Volatility-induced growth
JEL Classification: G10, G11, G14
Suggested Citation: Suggested Citation
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