Economics, Econometrics and Finance
4 years ago

Arbitrage strategy revolutionizes financial markets, impacting option pricing and hedging formulas.

1 view
arXiv (Cornell University)
Arbitrage strategy
Constantinos Kardaras

Paper Summary

An arbitrage strategy allows someone to make guaranteed profit without investing any money upfront. This is not allowed in stable markets because it would quickly change prices. Preventing arbitrage opportunities in financial markets has important effects on things like option pricing and hedging formulas.

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