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We consider a viable market model. Suppose that new information arrives at the market. We are interested in modeling the market reaction facing to the change of information. In particular we seek for the limit on the intensity of…
Geometric arbitrage theory reformulates a generic asset model possibly allowing for arbitrage by packaging all asset and their forward dynamics into a stochastic principal fibre bundle, with a connection whose parallel transport encodes…
"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…
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,…
The interbank market is considered one of the most important channels of contagion. Its network representation, where banks and claims/obligations are represented by nodes and links (respectively), has received a lot of attention in the…
We introduce two kinds of risk measures with respect to some reference probability measure, which both allow for a certain order structure and domination property. Analyzing their relation to each other leads to the question when a certain…
While historically, economists have been primarily occupied with analyzing the behaviour of the markets, electronic trading gave rise to a new class of unprecedented problems associated with market fairness, transparency and manipulation.…
We look at discovering the impact of market microstructure on equitability for market participants at public exchanges such as the New York Stock Exchange or NASDAQ. Are these environments equitable venues for low-frequency participants…
Algorithmic discrimination is a critical concern as machine learning models are used in high-stakes decision-making in legally protected contexts. Although substantial research on algorithmic bias and discrimination has led to the…
This work studies equilibrium problems under uncertainty where firms maximize their profits in a robust way when selling their output. Robust optimization plays an increasingly important role when best guaranteed objective values are to be…
This paper investigates arbitrage properties of financial markets under distributional uncertainty using Wasserstein distance as the ambiguity measure. The weak and strong forms of the classical arbitrage conditions are considered. A…
The rough Bergomi model, introduced by Bayer, Friz and Gatheral [Quant. Finance 16(6), 887-904, 2016], is one of the recent rough volatility models that are consistent with the stylised fact of implied volatility surfaces being essentially…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
We study competitive equilibrium in the canonical Fisher market model, but with indivisible goods. In this model, every agent has a budget of artificial currency with which to purchase bundles of goods. Equilibrium prices match between…
Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…
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…
We consider an incomplete multi-asset binomial market model. We prove that for a wide class of contingent claims the extremal multi-step martingale measure is a power of the corresponding single-step extremal martingale measure. This allows…
Do we know if a short selling ban or a Tobin Tax result in more stable asset prices? Or do they in fact make things worse? Just like medicine regulatory measures in financial markets aim at improving an already complex system. And just like…
With the fragmentation of electronic markets, exchanges are now competing in order to attract trading activity on their platform. Consequently, they developed several regulatory tools to control liquidity provision / consumption on their…