Work

Criteria for the absence of arbitrage in one-dimensional general diffusion markets

Year: 2026

Type: article

Abstract: We establish deterministic necessary and sufficient conditions for the no-arbitrage notions NA (“no arbitrage”), NUPBR (“no unbounded profit with bounded risk”) and NFLVR (“no free lunch with vanishing risk”) in one-dimensional general diffusion market models with finite and infinite time horizons. These are models whose (discounted) single risky asset price process $S$ S is a regular continuous strong Markov process that is also a semimartingale. We further characterise the existence of an equivalent martingale measure in such models. All deterministic criteria are provided in terms of the scale function and the speed measure of $S$ S .

Source: Finance and Stochastics

DOI: 10.1007/s00780-026-00593-9

Authors: David Criens, Mikhail Urusov

Institutions: University of Freiburg, University of Duisburg-Essen

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $2,090

Funder: Albert-Ludwigs-Universität Freiburg