Related papers: Arbitrage strategy
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
Traders buy and sell financial instruments in hopes of making profit, and brokers are responsible for the transaction. There are several hypotheses and conspiracy theories arguing that in some situations, brokers want their traders to lose…
In a continuous-time model with multiple assets described by c\`{a}dl\`{a}g processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
We give characterizations of asymptotic arbitrage of the first and second kind and of strong asymptotic arbitrage for large financial markets with small proportional transaction costs $\la_n$ on market $n$ in terms of contiguity properties…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
We apply Geometric Arbitrage Theory to obtain results in Mathematical Finance, which do not need stochastic differential geometry in their formulation. First, for a generic market dynamics given by a multidimensional It\^o's process we…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
In this paper we demonstrate both theoretically as well as numerically that neural networks can detect model-free static arbitrage opportunities whenever the market admits some. Due to the use of neural networks, our method can be applied…
The paper develops no arbitrage results for trajectory based models by imposing general constraints on the trading portfolios. The main condition imposed, in order to avoid arbitrage opportunities, is a local continuity requirement on the…
We reconsider the microeconomic foundations of financial economics. Motivated by the importance of Knightian Uncertainty in markets, we present a model that does not carry any probabilistic structure ex ante, yet is based on a common order.…
We discuss final-offer arbitration where two quantitative issues are in dispute and model it as a zero-sum game. Under reasonable assumptions we both derive a pure strategy pair and show that it is both a local equilibrium and furthermore…
Long-term relative arbitrage exists in markets where the excess growth rate of the market portfolio is bounded away from zero. Here it is shown that under a time-homogeneity hypothesis this condition will also imply the existence of…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…
Polymarket is a prediction market platform where users can speculate on future events by trading shares tied to specific outcomes, known as conditions. Each market is associated with a set of one or more such conditions. To ensure proper…
There is vast empirical evidence that given a set of assumptions on the real-world dynamics of an asset, the European options on this asset are not efficiently priced in options markets, giving rise to arbitrage opportunities. We study…
We present an explicit hedging strategy, which enables to prove arbitrageness of market incorporating at least two assets depending on the same random factor. The implied Black-Scholes volatility, computed taking into account the form of…