A Systematic Approach to Constructing Market Models With Arbitrage
Johannes Ruf, Wolfgang Runggaldier
TL;DR
This paper presents a systematic method for constructing market models that allow arbitrage but prevent unbounded profits, contributing to the understanding of market dynamics under certain arbitrage conditions.
Contribution
It introduces a novel systematic approach to build market models permitting arbitrage while ensuring no unbounded profits, filling a gap in existing financial modeling techniques.
Findings
Market models can be systematically constructed with arbitrage.
Models prevent unbounded profits despite arbitrage presence.
Provides a framework for analyzing arbitrage in financial markets.
Abstract
This short note provides a systematic construction of market models without unbounded profits but with arbitrage opportunities.
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