 Solution

ID: past-exam-of-the-mathematics-course-of-the-university-of-cambridge/2018/ii/paper-3/29k/a/solution

Codex  0 Created 2026-09-24 Updated 2026-10-03

Let

V_{t}

denote wealth measured in units of the strictly positive numéraire. A predictable self-financing portfolio is an arbitrage if

V_{0} = 0, V_{T} \geq 0 P -almost surely, P (V_{T} > 0) > 0.

Equivalently, one may permit

V_{0} \leq 0

provided one of the two gains is strict.

 New to topics? Read the docs here!