Exploiting arbitrage requires short selling
Fuente:
arXiv
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| Main Authors: | , |
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| Format: | Preprint |
| Published: |
2020
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| _version_ | 1866909914456129536 |
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| author | Platen, Eckhard Tappe, Stefan |
| author_facet | Platen, Eckhard Tappe, Stefan |
| contents | We show that in a financial market given by semimartingales an arbitrage opportunity, provided it exists, can only be exploited through short selling. This finding provides a theoretical basis for differences in regulation for financial services providers that are allowed to go short and those without short sales. The privilege to be allowed to short sell gives access to potential arbitrage opportunities, which creates by design a bankruptcy risk. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2011_12523 |
| institution | arXiv |
| publishDate | 2020 |
| record_format | arxiv |
| spellingShingle | Exploiting arbitrage requires short selling Platen, Eckhard Tappe, Stefan Mathematical Finance Probability We show that in a financial market given by semimartingales an arbitrage opportunity, provided it exists, can only be exploited through short selling. This finding provides a theoretical basis for differences in regulation for financial services providers that are allowed to go short and those without short sales. The privilege to be allowed to short sell gives access to potential arbitrage opportunities, which creates by design a bankruptcy risk. |
| title | Exploiting arbitrage requires short selling |
| topic | Mathematical Finance Probability |
| url | https://arxiv.org/abs/2011.12523 |