Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/288977 
Authors: 
Year of Publication: 
2020
Citation: 
[Journal:] Mathematics and Financial Economics [ISSN:] 1862-9660 [Volume:] 14 [Issue:] 3 [Publisher:] Springer [Place:] Berlin, Heidelberg [Year:] 2020 [Pages:] 461-506
Publisher: 
Springer, Berlin, Heidelberg
Abstract: 
We derive integral tests for the existence and absence of arbitrage in a financial market with one risky asset which is either modeled as stochastic exponential of an Itô process or a positive diffusion with Markov switching. In particular, we derive conditions for the existence of the minimal martingale measure. We also show that for Markov switching models the minimal martingale measure preserves the independence of the noise and we study how the minimal martingale measure can be modified to change the structure of the switching mechanism. Our main mathematical tools are new criteria for the martingale and strict local martingale property of certain stochastic exponentials.
Subjects: 
No arbitrage
Financial bubble
Minimal martingale measure
Itô process
Switching diffusion
Stochastic exponential
JEL: 
G44
H10
B70
C02
G19
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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