Related papers: Arbitrage strategy
Auctions in which agents' payoffs are random variables have received increased attention in recent years. In particular, recent work in algorithmic mechanism design has produced mechanisms employing internal randomization, partly in…
Zero-determinant strategies are a class of memory-one strategies in repeated games which unilaterally enforce linear relationships between payoffs. It has long been unclear for what stage games zero-determinant strategies exist. We provide…
Collusion in market pricing is a concept associated with human actions to raise market prices through artificially limited supply. Recently, the idea of algorithmic collusion was put forward, where the human action in the pricing process is…
We consider portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
Cyclic arbitrage chances exist abundantly among decentralized exchanges (DEXs), like Uniswap V2. For an arbitrage cycle (loop), researchers or practitioners usually choose a specific token, such as Ether as input, and optimize their input…
This paper investigates arbitrage chains involving four currencies and four foreign exchange trader-arbitrageurs. In contrast with the three-currency case, we find that arbitrage operations when four currencies are present may appear…
Negotiation is a very common interaction between automated agents. Many common negotiation protocols work with cardinal utilities, even though ordinal preferences, which only rank the outcomes, are easier to elicit from humans. In this work…
In the theory of riskfree hedges in continuous time finance, one can start with the delta-hedge and derive the option pricing equation, or one can start with the replicating, self-financing hedging strategy and derive both the delta-hedge…
This paper develops a mathematical framework for building a position in a stock over a fixed period of time while in competition with one or more other traders doing the same thing. We develop a game-theoretic framework that takes place in…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
Arbitrage can arise from the simultaneous purchase and sale of the same asset in different markets in order to profit from a difference in its price. This work systematically reviews arbitrage opportunities between Automated Market Makers…
This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…
We provide a general framework for no-arbitrage concepts in topological vector lattices, which covers many of the well-known no-arbitrage concepts as particular cases. The main structural condition we impose is that the outcomes of trading…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
Consider a market where a seller owns an item for sale and a buyer wants to purchase it. Each player has private information, known as their type. It can be costly and difficult for the players to reach an agreement through direct…
The aim of the strategic analysis is to (simply) carry out the game between the implementing body and possible links to the existing market situation. We are therefore playing a strategic game between us and the outside world. This…
We generalize the Arbitrage Pricing Theory (APT) to include the contribution of virtual arbitrage opportunities. We model the arbitrage return by a stochastic process. The latter is incorporated in the APT framework to calculate the…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…
The objective of this paper is to provide a comprehensive study no-arbitrage pricing of financial derivatives in the presence of funding costs, the counterparty credit risk and market frictions affecting the trading mechanism, such as…