No arbitrage without semimartingales

We show that with suitable restrictions on allowable trading strategies, one has no arbitrage in settings where the traditional theory would admit arbitrage possibilities. In particular, price processes that are not semimartingales are possible in our setting, for example, fractional Brownian motion.Comment: Published in at http://dx.doi.org/10.1214/08-AAP554 the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org

Pricing foreign currency options under stochastic interest rates

In this paper, we build a general framework to price contingent claims on foreign currencies using the Heath et al. (1987) model of the term structure. Closed form solutions are obtained for European options on currencies and currency futures assuming that the volatility functions determining the term structure are deterministic. As such, this paper provides an example of a bond price process (for both the domestic and foreign economies) consistent with Grabbe's (1983) formulation of the same problem.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/29151/1/0000193.pd

Statistical Arbitrage and Market Efficiency: Enhanced Theory, Robust Tests and Further Applications

Published in Journal of Financial Markets, February 2012, Volume 15, Issue 1, Pages 47-80. http://doi.org/10.1016/j.finmar.2011.08.003</p