Abstract
This chapter briefly recalls the fundamental arbitrage principles in a Brownian-motion-driven financial market. The basics of stochastic calculus are provided without proofs. Standard terminology is employed without further explanation. Readers are requested to consult one of the many text books on stochastic calculus. References are given in the notes section. The main pillars for financial applications are Itô’s formula, Girsanov’s change of measure theorem, and the martingale representation theorem.
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© 2009 Springer-Verlag Berlin Heidelberg
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Filipović, D. (2009). Arbitrage Theory. In: Term-Structure Models. Springer Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-68015-4_4
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DOI: https://doi.org/10.1007/978-3-540-68015-4_4
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Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-09726-6
Online ISBN: 978-3-540-68015-4
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