Arbitrage with Fractional Brownian Motion
Copyright policy )Arbitrage with Fractional Brownian Motion
Fractional Brownian motion has been suggested as a model for the movement of log share prices which would allow long–range dependence between returns on different days. While this is true, it also allows arbitrage opportunities, which we demonstrate both indirectly and by constructing such an arbitrage. Nonetheless, it is possible by looking at a process similar to the fractional Brownian motion to model long–range dependence of returns while avoiding arbitrage.
- University of Bath United Kingdom
Economic growth models, fractional Brownian motion, long-range dependence, Fractional processes, including fractional Brownian motion, Brownian motion, equivalent martingale measure, Financial applications of other theories, arbitrage, Signal detection and filtering (aspects of stochastic processes)
Economic growth models, fractional Brownian motion, long-range dependence, Fractional processes, including fractional Brownian motion, Brownian motion, equivalent martingale measure, Financial applications of other theories, arbitrage, Signal detection and filtering (aspects of stochastic processes)
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