On long-term arbitrage opportunities in Markovian models of financial markets |
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| Authors: | Martin L D Mbele Bidima Miklos Rasonyi |
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| Institution: | 1. Department of Mathematics and its Applications, Central European University, Budapest, Hungary
2. School of Mathematics, University of Edinburgh, JCMB King??s Buildings, Mayfield Road, Edinburgh, EH9 3JZ, UK
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| Abstract: | A discrete-time infinite horizon stock market model is considered where the logarithm of the price is assumed to be a Markov chain arising from the time-discretization of a stochastic differential equation. Conditions are given which ensure that there exist investment strategies producing an exponential growth of wealth with a probability converging to 1. The rate of this convergence is studied using large deviation techniques. |
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