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1answer
12 views

Volatility arbitrage - how is the profit extracted?

Is there any paper that describes in detail how the profit is extracted in directional volatility bet (vol arb)? I mean in the case that I bet the realized volatility will be lower than currently ...
0
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1answer
121 views

Trading spot volatility

I am reading a paper that very briefly talks about some volatility arbitrage strategies. It's so brief that I do not exactly understand how it works. It says one of the strategy is based on "short ...
-1
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1answer
375 views

Calculating arbitrage- S&P 500 stocks vs S&P 500 Index future?

How exactly would I go about investigating whether the S&P 500 stocks were currently over-valued compared with the price of the S&P 500 Index futures contract? Is it just a case of taking each ...
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0answers
46 views

FTAP in the model independent case, paper by Schachermayer

I have a question about the following paper by Beatrice Acciaio, Mathias Beiglböck, Friedrich Penkner, Walter Schachermayer. At the very beginning of the paper, on page 3, there are two definitions ...
3
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0answers
129 views

Arbitrage free price of a derivative when the price is collected over the lifetime of the derivative

Let $X_t$ be an american style financial derivative with random exercise time $T$ where $t$ and $T$ belongs to some finite set $A$. Buying this derivative requires the buyer to pay $p_t$ up to time ...
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0answers
47 views

Why is the LIBOR-market model free of arbitrage?

Recently I have been reading a lot on the market models. One thing that keeps escaping me - why is the Libor-market model (LMM) assumed to e free of aritrage in continuous time ? To me this means ...
1
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0answers
124 views

Example code for “Gauge Invariance, Geometry and Arbitrage” paper

This paper describes an algorithm for computing arbitrage opportunites using a gauge connetion. Has anyone written a python program or C++ or C# program that shows how to follow the steps outlines in ...
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0answers
35 views

EMM in incomplete markets

The simply put question is as follows: do we need to restrict ourselves to EMM exclusively when pricing European contingent claims (=option payoffs) even if markets are incomplete? In particular, a ...
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0answers
46 views

Log returns vs. prices

I am currently working on a stat arb that is giving me a little bit of trouble. I'm under the impression that most stat arbs are going to use prices such that we can choose a ratio N such that: Price ...
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0answers
80 views

Calculating index arbitrage

I have a days-worth of level 2 market data. I am calculating S&P500 index arbitrage. I have a few questions about the calculation: 1) Should I be summing all the bids and asks from the stocks ...
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0answers
71 views

Problem with setting up an arbitrage

I have a problem setting up an arbitrage table. I have to prove this relation: $$C_0 + P_0 \geq (k_2 − k_1) e^{−rt}$$ where $C_0$ is the price of a call with strike $k_1$, $P_0$ is the price of a ...