Empirical skewness of asset returns can be reproduced by stochastic processes other than the Brownian motion with drift. Some authors have proposed the skew Brownian motion for pricing as well as interest rate modelling. Although the asymmetric feature of random return involved in the stock price process is driven by a parsimonious one-dimensional model, we will show how this is intrinsically incompatible with a modern theory of arbitrage in continuous time. Application to investment performance and to the Black–Scholes pricing model clearly emphasize how this process can provide some kind of arbitrage.
|Titolo:||Arbitrage in skew Brownian motion models|
|Autori interni:||ROSSELLO, ANTONINO DAMIANO|
|Data di pubblicazione:||2012|
|Rivista:||INSURANCE MATHEMATICS & ECONOMICS|
|Appare nelle tipologie:||1.1 Articolo in rivista|