Related papers: No Arbitrage Conditions For Simple Trading Strateg…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
We give a collection of explicit sufficient conditions for the true martingale property of a wide class of exponentials of semimartingales. We express the conditions in terms of semimartingale characteristics. This turns out to be very…
This paper completes the analysis of Choulli et al. Non-Arbitrage up to Random Horizons and after Honest Times for Semimartingale Models and contains two principal contributions. The first contribution consists in providing and analysing…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a framework to jointly identify similar assets through factors, identify mispricing and form a trading policy that maximizes risk-adjusted…
We consider a one-period market model composed by a risk-free asset and a risky asset with $n$ possible future values (namely, a $n$-nomial market model). We characterize the lower envelope of the class of equivalent martingale measures in…
We extend the "No-dynamic-arbitrage and market impact"-framework of Jim Gatheral [Quantitative Finance, 10(7): 749-759 (2010)] to the multi-dimensional case where trading in one asset has a cross-impact on the price of other assets. From…
A strict local martingale is a local martingale which is not a martingale. There are few explicit examples of "naturally occurring" strict local martingales with jumps available in the literature. The purpose of this paper is to provide…
We investigate triangular arbitrage within the spot foreign exchange market using high-frequency executable prices. We show that triangular arbitrage opportunities do exist, but that most have short durations and small magnitudes. We find…
We discuss a class of Backward Stochastic Differential Equations(BSDEs) with no driving martingale. When the randomness of the driver depends on a general Markov process $X$, those BSDEs are denominated Markovian BSDEs and can be associated…
The concept of conditional expectation is important in applications of probability and statistics in many areas such as reliability engineering, economy, finance, and actuarial sciences due to its property of being the best predictor of a…
In this paper we investigate discrete time trading under integer constraints, that is, we assume that the offered goods or shares are traded in integer quantities instead of the usual real quantity assumption. For finite probability spaces…
We consider a discrete-time, generically incomplete market model and a behavioural investor with power-like utility and distortion functions. The existence of optimal strategies in this setting has been shown in a previous paper under…
A constrained informationally efficient market is defined to be one whose price process arises as the outcome of some equilibrium where agents face restrictions on trade. This paper investigates the case of short sale constraints, a setting…
We analyze the properties of arguably the simplest bilinear stochastic multiplicative process, proposed as a model of financial returns and of other complex systems combining both nonlinearity and multiplicative noise. By construction, it…
This paper presents sufficient conditions for the existence of stationary optimal policies for average-cost Markov Decision Processes with Borel state and action sets and with weakly continuous transition probabilities. The one-step cost…
In this paper we investigate the local risk-minimization approach for a semimartingale financial market where there are restrictions on the available information to agents who can observe at least the asset prices. We characterize the…
The stochastic exponential $Z_t=\exp\{M_t-M_0-(1/2) <M,M>_t\}$ of a continuous local martingale $M$ is itself a continuous local martingale. We give a necessary and sufficient condition for the process $Z$ to be a true martingale in the…
In this paper, we consider a class of slow-fast systems of stochastic partial differential equations where the nonlinearity in the slow equation is not continuous and unbounded. We first provide conditions that ensure the existence of a…
We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction…
We have embedded the classical theory of stochastic finance into a differential geometric framework called Geometric Arbitrage Theory and show that it is possible to: --Write arbitrage as curvature of a principal fibre bundle.…