The fairest price of an asset in an environment of temporary arbitrage

Details The fairest price of an asset in an environment of temporary arbitrage The fairest price of an asset in an environment of temporary arbitrage

2004-10-26

arxiv.org/abs/math/0410544v2

Mathematics

Probability

minor changes to introduction and abstract

Scientific paper

In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a ``fairest measure'' (instead of a martingale measure), albeit not necessarily unique. For this end, we define and analyse quantitative notions of unfairness in complete as well as incomplete market settings.

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