Related papers: Diversity and relative arbitrage in equity markets
Option prices encode the market's collective outlook through implied density and implied volatility. An explicit link between implied density and implied volatility translates the risk-neutrality of the former into conditions on the latter…
We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in…
A prevalent assumption in auction theory is that the auctioneer has full control over the market and that the allocation she dictates is final. In practice, however, agents might be able to resell acquired items in an aftermarket. A…
This paper considers possible price paths of a financial security in an idealized market. Its main result is that the variation index of typical price paths is at most 2, in this sense, typical price paths are not rougher than typical paths…
An alternative mathematics based on qualitative plurality of finiteness is developed to make non-standard mathematics independent of infinite set theory. The vague concept "accessibility" is used coherently within finite set theory whose…
Motivated by applications such as stock exchanges and spectrum auctions, there is a growing interest in mechanisms for arranging trade in two-sided markets. Existing mechanisms are either not truthful, or do not guarantee an…
We investigate an optimal investment problem with a general performance criterion which, in particular, includes discontinuous functions. Prices are modeled as diffusions and the market is incomplete. We find an explicit solution for the…
Mathematical models for financial asset prices which include, for example, stochastic volatility or jumps are incomplete in that derivative securities are generally not replicable by trading in the underlying. In earlier work (2004) the…
We consider a competitive market with risk-averse participants. We assume that agents' risks are measured by coherent risk measures introduced by Artzner et al. (1999). Fundamental theorems of welfare economics have long established the…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
Given a multi-dimensional It\^{o} process whose drift and diffusion terms are adapted processes, we construct a weak solution to a stochastic differential equation that matches the distribution of the It\^{o} process at each fixed time.…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
Given a set of conflicting arguments, there can exist multiple plausible opinions about which arguments should be accepted, rejected, or deemed undecided. We study the problem of how multiple such judgments can be aggregated. We define the…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…
We introduce the notions of Collective Arbitrage and of Collective Super-replication in a discrete-time setting where agents are investing in their markets and are allowed to cooperate through exchanges. We accordingly establish versions of…
Portfolio optimization methods suffer from a catalogue of known problems, mainly due to the facts that pair correlations of asset returns are unstable, and that extremal risk measures such as maximum drawdown are difficult to predict due to…
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…
We study the problem of online dynamic pricing with two types of fairness constraints: a "procedural fairness" which requires the proposed prices to be equal in expectation among different groups, and a "substantive fairness" which requires…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…