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The fairest price of an asset in an environment of temporary arbitrage

Frederik Herzberg
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Abstract

In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a ``fairest measure'' (instead of a martingale measure), albeit not necessarily unique. For this end, we define and analyse quantitative notions of unfairness in complete as well as incomplete market settings.

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Frederik Herzberg. 2004-11-02. The fairest price of an asset in an environment of temporary arbitrage. https://arxiv.org/abs/math/0410544

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