Details for Talk on: 4.11.2014

  • Speaker: Steffen Schuldenzucker
  • Title: Decomposing Contracts - A Formalism for Arbitrage Argumentations
  • Abstract: Arbitrage arguments are statements about the prices of derivatives in perfect financial markets which are based purely on the assumption that no market participant can make profit without exposing herself to risk. I present my framework for carrying out arbitrage proofs in a purely formal way, without having to rely on any stochastic assumptions. For this, I present a set of (previously known) essential building blocks every financial contract is composed of and I define rules for their behavior under no-arbitrage conditions. I provide evidence that the framework does indeed capture the informal notion of arbitrage arguments by proving some well-known statements inside the theory as well as showing that a simple stochastic model implements the theory.