no code implementations • 30 Jun 2023 • Fausto Di Biase, Stefano Di Rocco, Alessandra Ortolano, Maurizio Parton
We assume that the payoff amounts are established contractually at time zero, whence the requirement that no arbitrage may arise this way The first goal of this paper is to study this new formula and derive it within a model of a loan market in which loans are bought and sold at simple interest, interest rates change over time, and no arbitrage opportunities exist.
