Does the Market Anticipate? Can it? Should it?
Fuente:
arXiv
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| Natura: | Preprint |
| Pubblicazione: |
2026
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| _version_ | 1866911668778303488 |
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| author | Wren, Kangda Ken |
| author_facet | Wren, Kangda Ken |
| contents | We explore a nuance to 'no arbitrage' in relation to 'information efficiency': acting immediately on an arbitrage is sometimes suboptimal; in such cases optimised trading can suppress the anticipation of predictable risk-outcomes, thereby creating an apparent Status Quo Bias, with Momentum and Low-Risk effects. This is shown in continuous time under model- or event-risk, where, unlike existing approaches, we allow pre-horizon risk-resolution and Risk-Neutral Equivalent pricing, with the technical challenges overcome through results from the 'weak viability' and 'side/inside information' literature. Thus the tension between 'no arbitrage', 'information efficiency' and 'risk-anticipation' is exposed and treated in a practically relevant setting. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2603_02187 |
| institution | arXiv |
| publishDate | 2026 |
| record_format | arxiv |
| spellingShingle | Does the Market Anticipate? Can it? Should it? Wren, Kangda Ken Mathematical Finance 62M20 We explore a nuance to 'no arbitrage' in relation to 'information efficiency': acting immediately on an arbitrage is sometimes suboptimal; in such cases optimised trading can suppress the anticipation of predictable risk-outcomes, thereby creating an apparent Status Quo Bias, with Momentum and Low-Risk effects. This is shown in continuous time under model- or event-risk, where, unlike existing approaches, we allow pre-horizon risk-resolution and Risk-Neutral Equivalent pricing, with the technical challenges overcome through results from the 'weak viability' and 'side/inside information' literature. Thus the tension between 'no arbitrage', 'information efficiency' and 'risk-anticipation' is exposed and treated in a practically relevant setting. |
| title | Does the Market Anticipate? Can it? Should it? |
| topic | Mathematical Finance 62M20 |
| url | https://arxiv.org/abs/2603.02187 |