Related papers: On optimal arbitrage
We study the optimization of the expected long-term reward in finite partially observable Markov decision processes over the set of stationary stochastic policies. In the case of deterministic observations, also known as state aggregation,…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
The paper studies a non-linear transformation between Brownian martingales, which is given by the inverse of the pricing operator in the mathematical finance terminology. Subsequently, the solvability of systems of equations corresponding…
We propose a new method for finding statistical arbitrages that can contain more assets than just the traditional pair. We formulate the problem as seeking a portfolio with the highest volatility, subject to its price remaining in a band…
This paper provides a general characterization of subgame perfect equilibria for strategic timing problems, where two firms have the (real) option to make an irreversible investment. Profit streams are uncertain and depend on the market…
We initiate the study of how to perturb the reward in a zero-sum Markov game with two players to induce a desirable Nash equilibrium, namely arbitrating. Such a problem admits a bi-level optimization formulation. The lower level requires…
This paper extends the optimal-trading framework developed in arXiv:2409.03586v1 to compute optimal strategies with real-world constraints. The aim of the current paper, as with the previous, is to study trading in the context of…
We present an approach, based on deep neural networks, that allows identifying robust statistical arbitrage strategies in financial markets. Robust statistical arbitrage strategies refer to trading strategies that enable profitable trading…
We establish existence, uniqueness and regularity of solution results for a class of backward stochastic partial differential equations with singular terminal condition. The equation describes the value function of non-Markovian stochastic…
We introduce a criterion how to price derivatives in incomplete markets, based on the theory of growth optimal strategy in repeated multiplicative games. We present reasons why these growth-optimal strategies should be particularly relevant…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
We study optimal investment strategies that maximize expected utility from consumption and terminal wealth in a pure-jump asset price model with Markov-modulated (regime switching) jump-size distributions. We give sufficient conditions for…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
We consider an augmented version of Merton's portfolio choice problem, where trading by large investors influences the price of underlying financial asset leading to strategic interaction among investors, with investors deciding their…
In this paper, we present an optimal control problem for stochastic differential games under Markov regime-switching forward-backward stochastic differential equations with jumps and partial information. First, we prove a sufficient maximum…
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…
We consider the problem of optimal hedging in an incomplete market with an established pricing kernel. In such a market, prices are uniquely determined, but perfect hedges are usually not available. We work in the rather general setting of…
In this paper, we study representative investor's G-utility maximization problem by G-martingale approach in the framework of G-expectation space proposed by Peng \cite{Pe19}. Financial market has only a bond and a stock with uncertainty…
Market efficiency at least requires the absence of weak arbitrage opportunities, but this is not sufficient to establish a situation where the market is sensitive, i.e., where it "fully reflects" or "rapidly adjusts to" some information…