# Questions tagged [no-arbitrage-theory]

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### Question About SVI and SSVI Tradeoff between Fitness and No-Arbitrage

I’m currently working on a project to build a local volatility model out of implied volatility data and am struggling in the selection of an appropriate method to interpolate the volatility surface. I ...
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### How to Take Advantage of Arbitrage Opportunity of Two Options

I got the following interview question and corresponding solution, but I have a different understand that might be wrong, so I really appreciate your advice on it: A European put option on a non-...
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### No-arbitrage Pricing

We have a contract whose value is $A(S_t,t) = S_t^3$ at all times, not just at expiration. $S_t$, the underlying stock, follows a Geometric Brownian Motion, $\frac{dS}{S} = \mu dt + \sigma dB$. How ...
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### Forward contract pricing of coupon paying security

PLease help me in understanding how to price forward contract for coupon paying security. For instance if we get into a contract to buy a security in next six month whose coupon due in next two month. ...
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### Deriving forward rate

I want to price a 1 year future under the condition of no arbitrage and based on LOOP. At time T, I sell currency Z and buy currency L. At time $t$, we define the exchange rate as $ZL_t$. The 1 year ...
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### Are there values of the strike price for which an American put and European put have the same no-arbitrage price?

Assuming the options do not pay dividends, is there a strike price that satisfies this?
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### some questions about pricing an asset or nothing put option with a strike price equal to St

I am working on a homework exercise where the aim is to price an asset or nothing put with K = St, offcourse the normal formula could be used St * N(-d1), but I was wondering if pricing the asset by ...
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### Binomial model in Björk's Arbitrage Theory in Continuous Time

I am having some trouble with variable $Z$ introduced in chapter $2$ in Björk's text. In the beginning, it is the random variable that attains $u$ resp. $d$ with probabilities $p_{1}$ and $p_{2}$, i.e....
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### Is there an arbitrage strategy if short selling of a stock is allowed?

Consider a market with a risk-free asset such that $A(0) = 100, A(1) = 110, A(2) = 121$ dollars and a risky asset, the price of which can follow three possible scenarios Is there an arbitrage ...
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