The Limit of Arbitrage Under Collateral Constraint
Date Issued
2006
Date
2006
Author(s)
Lin, Chun-Chieh
DOI
zh-TW
Abstract
The main purpose of the thesis is that in the stochastic volatility state when arbitrageurs face the arbitrage opportunities , they will decide their optimal dynamic portfolio strategy . We obtain the conclusion that arbitrageurs would adjust the weight with the value of arbitrage portfolio , and they find it optimal to underinvest in the arbitrage by taking a smaller position than collateral constraints allow . Furthermore, we discuss the existence of the Wealth effect , the main cause of the Wealth effect is that arbitrageurs are short of their capital .
In the theoretical model , we assume that as the volatility increases , we find that there is an amplification phenomenon in the arbitrage . In the numerical analysis , under different conditions, such as constant volatility , stochastic volatility , constant risk premium and dynamic risk premium , we also find the relation between the value of arbitrage portfolio and the volatility .When the sensitivity of the volatileity is large enough , there may exist the rigidity of the value of arbitrage portfolio .
Subjects
套利的限制
財富限制
風險溢酬
隨機波動度
The limit of arbitrage
Collateral constraint
Risk premium
Stochastic volatility
Type
thesis
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