No-Arbitrage Bounds for Financial Scenarios

Geyer, Alois and Hanke, Michael and Weissensteiner, Alex (2014) No-Arbitrage Bounds for Financial Scenarios. Journal of Operational Research, 236 (2). pp. 657-663. ISSN 0377-2217


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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. (authors' abstract)

Item Type: Article
Additional Information: To see the final version of this paper please visit the publisher's website. Access to the published version requires a subscription. The original publication is available at
Keywords: finance / scenarios / no-arbitrage bounds / financial optimization
Divisions: Departments > Finance, Accounting and Statistics
Version of the Document: Submitted
Variance from Published Version: Typographical
Depositing User: ePub Administrator
Date Deposited: 28 Nov 2014 12:47
Last Modified: 17 Jul 2020 15:11
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