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We study a new "laminated" queueing model for orders on batched trading venues such as decentralised exchanges. The model aims to capture and generalise transaction queueing infrastructure that has arisen to organise MEV activity on public…
We use the martingale method to discuss the relationship between mean-variance (MV) and monotone mean-variance (MMV) portfolio selections. We propose a unified framework to discuss the relationship in general financial markets without any…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
We present a machine learning approach for finding minimal equivalent martingale measures for markets simulators of tradable instruments, e.g. for a spot price and options written on the same underlying. We extend our results to markets…
This paper investigates the common intuition suggesting that during crises the shape of the financial market clearly differentiates from that of random walk processes. In this sense, it challenges the analysis of the nature of financial…
In the paper, the martingales and super-martingales relative to a regular set of measures are systematically studied. The notion of local regular super-martingale relative to a set of equivalent measures is introduced and the necessary and…
Motivated by the robustness of the capital distribution curves, we study the behavior of a certain polynomial equity market model as the number of companies goes to infinity. More precisely, we extend volatility-stabilized market models…
The introduction of leverage on prediction-market event contracts raises three structurally distinct questions that have not been addressed jointly: how leverage changes manipulation incentives, how it interacts with informed-trading rents,…
In general it is not clear which kind of information is supposed to be used for calculating the fair value of a contingent claim. Even if the information is specified, it is not guaranteed that the fair value is uniquely determined by the…
The recent "correlation breakdown" in the modeling of credit default swaps, in which model correlations had to exceed 100% in order to reproduce market prices of supersenior tranches, is analyzed and argued to be a fundamental market…
This paper revisits the classic instrument choice problem in a setting with consumption externalities, through the lens of robust mechanism design. A regulator can implement any incentive-compatible policy but is uncertain about how…
In order to pursue the issue of the relation between the financial cross-correlations and the conventional Random Matrix Theory we analyse several characteristics of the stock market correlation matrices like the distribution of…
The rapid explosion in retail data calls for more effective and efficient discovery of association rules to develop relevant business strategies and rules.Unlike online shopping sites, most brick and mortar retail shops are located in…
Market Mill is a complex dependence pattern leading to nonlinear correlations and predictability in intraday dynamics of stock prices. The present paper puts together previous efforts to build a dynamical model reflecting the market mill…
The information dynamics in finance and insurance applications is usually modeled by a filtration. This paper looks at situations where information restrictions apply such that the information dynamics may become non-monotone. A fundamental…
Dynamical systems with components whose sizes evolve according to multiplicative stochastic rules have been recently combined with entry and exit processes. We show that the assumptions usually made in modeling exits are at odds with the…
In common finance literature, Black-Scholes partial differential equation of option pricing is usually derived with no-arbitrage principle. Considering an asset market, Merton applied the Hamilton-Jacobi-Bellman techniques of his…
An empirical analysis, suggested by optimal Merton dynamics, reveals some unexpected features of asset volumes. These features are connected to traders' belief and risk aversion. This paper proposes a trading strategy model in the optimal…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…