Relative arbitrage: sharp time horizons and motion by curvature
Larsson, M. & Ruf, J.
(2021).
Relative arbitrage: sharp time horizons and motion by curvature.
Mathematical Finance,
31(3), 885 - 906.
https://doi.org/10.1111/mafi.12303
(2021).
Relative arbitrage: sharp time horizons and motion by curvature.
Mathematical Finance,
31(3), 885 - 906.
https://doi.org/10.1111/mafi.12303
We characterize the minimal time horizon over which any equity market with d ≥ 2 stocks and sufficient intrinsic volatility admits relative arbitrage. If d ∈ {2, 3}, the minimal time horizon can be computed explicitly, its value being zero if √ d = 2 and 3/(2π) if d = 3. If d ≥ 4, the minimal time horizon can be characterized via the arrival time function of a geometric flow of the unit simplex in R d that we call the minimum curvature flow.
