In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker than classical absence of arbitrage opportunities. We...

We consider a general class of diffusion-based models and show that, even in the absence of an Equivalent Local Martingale Measure, the financial market may still be viable, in the sense that strong forms of arbitrage are excluded and portfolio optimisation problems can be meaningfully solved....

In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability assumption, which enables us to work in the context of...

We consider a reduced-form credit risk model where default intensities and interest rate are functions of a not fully observable Markovian factor process, thereby introducing an information-driven default contagion effect among defaults of different issuers. We determine arbitrage-free prices of...