New answers tagged no-arbitrage-theory
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Understanding completeness in this simple one-period exercise
I don't think you need the contingent claim calculation but the problem can be solved a little bit easier. (For the future, don't use b twice when meaning different things :)).
I think you can solve ...
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Free Arbitrage conditions in ATM swaption surfaces
See
Johnson, Simon and Nonas, Bereshad, Arbitrage-Free Construction of the Swaption Cube (January 5, 2009). Available at SSRN: https://ssrn.com/abstract=1330869 or http://dx.doi.org/10.2139/ssrn....
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The relationship between no-arbitrage and the law of one price
A simple textbook example is the following. Consider a discrete market with two assets and one time step: $B_0=-0.1$, $B_1(\omega)=1 \;\forall\omega\in\Omega$ and $S_0=-0.2$ and $S_1(\omega)=2\;\...
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