Sure Profits via Flash Strategies and the Impossibility of Predictable Jumps | Zendy

Claudio Fontana | Zendy; Markus Pelger | Zendy; Eckhard Platen | Zendy

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Sure Profits via Flash Strategies and the Impossibility of Predictable Jumps

Author(s) -

Claudio Fontana,

Markus Pelger,

Eckhard Platen

Publication year - 2017

Publication title -

ssrn electronic journal

Language(s) - English

Resource type - Journals

ISSN - 1556-5068

DOI - 10.2139/ssrn.3014962

Subject(s) - semimartingale , economics , arbitrage , impossibility , dividend , transaction cost , asset (computer security) , limits to arbitrage , microeconomics , econometrics , database transaction , mathematical economics , financial economics , computer science , finance , mathematics , programming language , computer security , political science , law

In an arbitrage-free financial market, asset prices should not exhibit jumps of a predictable magnitude at predictable times. We provide a rigorous formulation of this result in a fully general setting, only allowing for buy-and-hold positions and without imposing any semimartingale restriction. We show that asset prices do not exhibit predictable jumps if and only if there is no possibility of obtaining sure profits via high-frequency limits of buy-and-hold trading strategies. Our results imply that, under minimal assumptions, price changes occurring at scheduled dates should only be due to unanticipated information releases.

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