We derive no-arbitrage bounds for expected excess returns to generate scenarios used in financial
applications. The bounds allow to distinguish three regions: one where arbitrage opportunities will
never exist, a second where arbitrage may be present, and a third, where arbitrage opportunities
will always exist. No-arbitrage bounds are derived in closed form for a given covariance matrix
using the least possible number of scenarios. Empirical examples illustrate the practical potential
of knowing these bounds. (authors' abstract)
| Identifer | oai:union.ndltd.org:VIENNA/oai:epub.wu-wien.ac.at:4387 |
| Date | 16 July 2014 |
| Creators | Geyer, Alois, Hanke, Michael, Weissensteiner, Alex |
| Publisher | Elsevier |
| Source Sets | Wirtschaftsuniversität Wien |
| Language | English |
| Detected Language | English |
| Type | Article, PeerReviewed |
| Format | application/pdf |
| Relation | http://dx.doi.org/10.1016/j.ejor.2014.01.027, http://www.elsevier.com/, http://epub.wu.ac.at/4387/ |
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