An arbitrage arises when a non-investment, riskless undertaking results in the generation of profits. However, under efficient markets such opportunities are exploited as soon as they arise, by arbitrageurs- who are market participants with the ability to identify discrepancies in the pricing of...

In frictionless markets, the absence of arbitrage opportunities is equivalent to the existence of a martingale process evolving in the ray R_ S where S is the d-dimensional price process (whose first component is the numeraire). With transaction costs, absence of arbitrage opportunities is...

In contrast with the classical models of frictionless financial markets, market models with proportional transaction costs, even satisfying usual no-arbitrage properties, may admit arbitrage opportunities of the second kind. This means that there are self-financing portfolios with initial...

This paper develops a model in which arbitrageurs are collectively unconstrained. Yet, they may prefer to incur individual limits of arbitrage rather than use their combined resources to capture every available arbitrage opportunity. Such deliberate limits to arbitrage arise because the...

Convertible arbitrageurs combine long positions in convertibles with short positions in the underlying stock. We exploit worldwide differences in short-sale constraints to examine whether convertible arbitrage short selling creates downward pressure on convertible issuers' stock prices. Using a...

Following the previous works of Kamtchueng, we explain in more details, how to use the CVA Implied Volatility considering at the same time the netting arbitrage between a derivative and its hedging portfolio. Trough concrete pricing examples, we will demonstrate the advantages and the limitation...

The intention of this study is to analyze the variability of Arbitrage price theory (APT) in case of KSE. The data from Jan 1985 to Dec 2008 is monthly based has been considered and two econometric methodologies, Johanson co integration and Error correction model are used to checkout the...

A large part of the term structure literature interprets the first underlying factors as a level factor, a slope factor, and a curvature factor. In this paper we consider factor models interpretable as a level factor model, a level and a slope factor model, respectively. We prove that such...