Related papers: Diversity and relative arbitrage in equity markets
"Fundamental theorem of asset pricing" roughly states that absence of arbitrage opportunity in a market is equivalent to the existence of a risk-neutral probability. We give a simple counterexample to this oversimplified statement. Prices…
Generalization of the minority game to more than one market is considered. At each time step every agent chooses one of its strategies and acts on the market related to this strategy. If the payoff function allows for strong fluctuation of…
Investors trade shifting prices, portfolio values, and in turn their ability to borrow. Concentrated ownership, high price impact and low collateral requirements are propitious for arbitrage.
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
We introduce and discuss a general criterion for the derivative pricing in the general situation of incomplete markets, we refer to it as the No Almost Sure Arbitrage Principle. This approach is based on the theory of optimal strategy in…
We introduce a new tool for predicting the evolution of an option for the cases where at some specific time, there is a high-degree of uncertainty for identifying its price. We work over the special case where we can predict the evolution…
In the portfolio multiobjective optimization framework, we propose to compare and choose, among all feasible asset portfolios of a given market, the one that maximizes the product of the distances between its values of risk and gain and…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
We point out some major drawbacks in random trading market models and propose a realistic modification which overcomes such drawbacks through `sensible trading'. We apply such trading policy in different situations: a) Agents with zero…
We investigate the possibility of statistical evaluation of the market completeness for discrete time stock market models. It is known that the market completeness is not a robust property: small random deviations of the coefficients…
We study resource allocation in two-sided markets from a fundamental perspective and introduce a general modeling and algorithmic framework to effectively incorporate the complex and multidimensional aspects of fairness. Our main technical…
There are several aspects of data markets that distinguish them from a typical commodity market: asymmetric information, the non-rivalrous nature of data, and informational externalities. Formally, this gives rise to a new class of games…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
We show that in a financial market given by semimartingales an arbitrage opportunity, provided it exists, can only be exploited through short selling. This finding provides a theoretical basis for differences in regulation for financial…
We present four methods of assessing the diversification potential within a stock market, two of these are based on principal component analysis. They were applied to the Australian stock exchange for the years 2000 to 2014 and all show a…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
Many important economic outcomes result from the combined effects of several choices, so the best option is not determined from each choice in isolation, but depends on how each choice alters total outcomes. We formally show that narrow…
Financial options are contracts that specify the right to buy or sell an underlying asset at a strike price by an expiration date. Standard exchanges offer options of predetermined strike values and trade options of different strikes…
The numeraire portfolio in a financial market is the unique positive wealth process that makes all other nonnegative wealth processes, when deflated by it, supermartingales. The numeraire portfolio depends on market characteristics, which…