Hokkaido University Preprint Series in Mathematics
Volume:
661
Start Page:
1
End Page:
13
Abstract:
We construct a binary market model with memory that approximates a continuous-time market model driven by a Gaussian process equivalent to Brownian motion. We give a sufficient conditions for the binary market to be arbitrage-free. In a case when arbitrage opportunities exist, we present the rate at which the arbitrage probability tends to zero as the number of periods goes to infinity.
