Quotation Geyer, Alois, Hanke, Michael, Weissensteiner, Alex. 2014. No-arbitrage bounds for financial scenarios. European Journal of Operational Research (EJOR) 236 (2): 657-663.




We derive no-arbitrage bounds for expected excess returns to generate scenarios used in financial applications. The bounds allow to distinguish three regions: one where arbitrage opportunities will never exist, a second where arbitrage may be present, and a third, where arbitrage opportunities will always exist. No-arbitrage bounds are derived in closed form for a given covariance matrix using the least possible number of scenarios. Empirical examples illustrate the practical potential of knowing these bounds.


Press 'enter' for creating the tag

Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal European Journal of Operational Research (EJOR)
Citation Index SCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, INF-A, STRAT-A, VW-B, WH-A
Language English
Title No-arbitrage bounds for financial scenarios
Volume 236
Number 2
Year 2014
Page from 657
Page to 663
Reviewed? Y
URL http://dx.doi.org/10.1016/j.ejor.2014.01.027


Arbitrage-free scenario trees for financial optimization
Geyer, Alois (Details)
Hanke, Michael (University of Liechtenstein, Institute for Financial Services, 9490 Vaduz, Liechtenstein)
Weissensteiner, Alex (School of Economics and Management, Free University of Bolzano, Italy, Italy)
Institute for Financial Research IN (Details)
Competence Center for Empirical Research Methods WE (Details)
Google Scholar: Search