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Generalised Lyapunov functions and functionally generated trading strategies

Ruf, Johannes and Xie, Kangjianan (2019) Generalised Lyapunov functions and functionally generated trading strategies. Applied Mathematical Finance. 1 - 35. ISSN 1350-486X

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Identification Number: 10.1080/1350486X.2019.1584041

Abstract

This paper investigates the dependence of functional portfolio generation, introduced by Fernholz (1999), on an extra finite variation process. The framework of Karatzas and Ruf (2017) is used to formulate conditions on trading strategies to be strong arbitrage relative to the market over sufficiently large time horizons. A mollification argument and Komlós theorem yield a general class of potential arbitrage strategies. These theoretical results are complemented by several empirical examples using data from the S&P 500 stocks.

Item Type: Article
Official URL: https://www.tandfonline.com/toc/ramf20/current
Additional Information: © 2019 Informa UK
Divisions: Mathematics
Subjects: H Social Sciences > HG Finance
Q Science > QA Mathematics
H Social Sciences > HB Economic Theory
Date Deposited: 08 Nov 2019 09:42
Last Modified: 09 Dec 2019 00:21
URI: http://eprints.lse.ac.uk/id/eprint/102424

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