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Type | Journal Article |
Scope | Discipline-based scholarship |
Title | Insiders and Their Free Lunches: The Role of Short Positions |
Organization Unit | |
Authors |
|
Item Subtype | Original Work |
Refereed | Yes |
Status | Published in final form |
Language |
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Journal Title | SIAM Journal on Financial Mathematics |
Publisher | Society for Industrial and Applied Mathematics |
Geographical Reach | international |
ISSN | 1945-497X |
Volume | 13 |
Number | 3 |
Page Range | 877 - 902 |
Date | 2022 |
Abstract Text | Given a stock price process, we analyze the potential of arbitrage in a context of short-selling prohibitions. We introduce the notion of minimal supermartingale measure, and we analyze its properties in connection with the minimal martingale measure. This question is more specifically analyzed in the case of an investor having additional, inside information. In particular, we establish conditions when minimal martingale and supermartingale measures both fail to exist. These correspond to the case when the insider information includes some nonnull events that are perceived as having null probabilities by the uninformed market investors, even as they cannot observe them. The results may have different applications, such as in problems related to the local risk minimization for insiders whenever strategies are implemented without short selling. |
Free access at | DOI |
Digital Object Identifier | 10.1137/20M1375826 |
Other Identification Number | merlin-id:22616 |
PDF File | Download from ZORA |
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Keywords | insider trading model, short sales restrictions, arbitrages, minimal martingale measure, minimalsupermartingale measure |