Binary market models with memory

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 condition for the binary model to be arbitrage-free. In a case when arbitrage opportunities exist, we present the rate at which the arbitrage probability tends to zero.

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Year of publication:	2007
Authors:	Inoue, Akihiko ; Nakano, Yumiharu ; Anh, Vo
Published in:	Statistics & Probability Letters. - Elsevier, ISSN 0167-7152. - Vol. 77.2007, 3, p. 256-264
Publisher:	Elsevier
Keywords:	Financial market with memory Binary market Arbitrage

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005319337