Mean-reverting market model: speculative opportunities and non-arbitrage
The paper studies arbitrage opportunities and possible speculative opportunities for diffusion mean-reverting market models. It is shown that the Novikov condition is satisfied for any time interval and for any set of parameters. It is non-trivial because the appreciation rate has Gaussian distribut...
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| Format: | Journal Article |
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Chapman & Hall (Taylor & Francis)
2011
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| Online Access: | http://hdl.handle.net/20.500.11937/28616 |
| _version_ | 1848752584494415872 |
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| author | Dokuchaev, Nikolai |
| author_facet | Dokuchaev, Nikolai |
| author_sort | Dokuchaev, Nikolai |
| building | Curtin Institutional Repository |
| collection | Online Access |
| description | The paper studies arbitrage opportunities and possible speculative opportunities for diffusion mean-reverting market models. It is shown that the Novikov condition is satisfied for any time interval and for any set of parameters. It is non-trivial because the appreciation rate has Gaussian distribution converging to a stationary limit. It follows that the mean-reverting model is arbitrage-free for any finite time interval. Further, it is shown that this model still allows some speculative opportunities: a gain for a wide enough set of expected utilities can be achieved for a strategy that does not require any hypothesis on market parameters and does not use estimation of these parameters. |
| first_indexed | 2025-11-14T08:10:57Z |
| format | Journal Article |
| id | curtin-20.500.11937-28616 |
| institution | Curtin University Malaysia |
| institution_category | Local University |
| last_indexed | 2025-11-14T08:10:57Z |
| publishDate | 2011 |
| publisher | Chapman & Hall (Taylor & Francis) |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | curtin-20.500.11937-286162017-09-13T16:07:20Z Mean-reverting market model: speculative opportunities and non-arbitrage Dokuchaev, Nikolai mean-reverting model technical analysis universal portfolio self-financing strategies arbitrage diffusion market The paper studies arbitrage opportunities and possible speculative opportunities for diffusion mean-reverting market models. It is shown that the Novikov condition is satisfied for any time interval and for any set of parameters. It is non-trivial because the appreciation rate has Gaussian distribution converging to a stationary limit. It follows that the mean-reverting model is arbitrage-free for any finite time interval. Further, it is shown that this model still allows some speculative opportunities: a gain for a wide enough set of expected utilities can be achieved for a strategy that does not require any hypothesis on market parameters and does not use estimation of these parameters. 2011 Journal Article http://hdl.handle.net/20.500.11937/28616 10.1080/13504860701255078 Chapman & Hall (Taylor & Francis) restricted |
| spellingShingle | mean-reverting model technical analysis universal portfolio self-financing strategies arbitrage diffusion market Dokuchaev, Nikolai Mean-reverting market model: speculative opportunities and non-arbitrage |
| title | Mean-reverting market model: speculative opportunities and non-arbitrage |
| title_full | Mean-reverting market model: speculative opportunities and non-arbitrage |
| title_fullStr | Mean-reverting market model: speculative opportunities and non-arbitrage |
| title_full_unstemmed | Mean-reverting market model: speculative opportunities and non-arbitrage |
| title_short | Mean-reverting market model: speculative opportunities and non-arbitrage |
| title_sort | mean-reverting market model: speculative opportunities and non-arbitrage |
| topic | mean-reverting model technical analysis universal portfolio self-financing strategies arbitrage diffusion market |
| url | http://hdl.handle.net/20.500.11937/28616 |