This paper considers fundamental questions of arbitrage pricing that arises when the uncertainty model incorporates … extension of the paper by Ross (1976) (Ross, Stephen A. 1976. The arbitrage theory of capital asset pricing. Journal of Economic … and arbitrage in multiperiod securities markets. Journal of Economic Theory 20: 381–408), the paper establishes a micro …

in discrete space and continuous time. The market described allows fleeting arbitrage opportunities, since a vanishing …

in discrete space and continuous time. The market described allows fleeting arbitrage opportunities, since a vanishing …

inaccurate calibration of the implied volatility. This issue can raise the risk of generating an arbitrage. In this paper, first …, we discuss that by imposing the no-moral-hazard risk, the removal of arbitrage is equivalent to removing the static … arbitrage. Then, we propose a simple quadratic model to parameterize implied volatility and remove the static arbitrage. The …

We present a method for the arbitrage-free interpolation of plain-vanilla option prices and implied volatilities, which … accuracy of our method. In order to allow for the treatment of realistic inputs that may contain arbitrage, we reformulate the … input prices and the arbitrage-free prices generated by our method. To further stabilize the method in the presence of noisy …

In this paper, we introduce a 3D finite dimensional Gaussian process (GP) regression approach for learning arbitrage … is proven to be arbitrage-free along the strike direction (butterfly and call-spread arbitrages are precluded on the … entire 3D input domain). The cube is free from static arbitrage along the tenor and maturity directions if swaption prices …