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Deterministic Criteria for the Absence and Existence of Arbitrage in Multi-Dimensional Diffusion Markets (1609.01621v5)
Published 6 Sep 2016 in q-fin.MF and math.PR
Abstract: We derive deterministic criteria for the existence and non-existence of equivalent (local) martingale measures for financial markets driven by multi-dimensional time-inhomogeneous diffusions. Our conditions can be used to construct financial markets in which the \emph{no unbounded profit with bounded risk} condition holds, while the classical \emph{no free lunch with vanishing risk} condition fails.