Related papers: On optimal arbitrage
We consider the problem of optimal investment with intermediate consumption in a general semimartingale model of an incomplete market, with preferences being represented by a utility stochastic field. We show that the key conclusions of the…
This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…
This paper proposes two approaches that quantify the exact relationship among the viability, the absence of arbitrage, and/or the existence of the num\'eraire portfolio under minimal assumptions and for general continuous-time market…
We study long-term growth-optimal strategies on a simple market with linear proportional transaction costs. We show that several problems of this sort can be solved in closed form, and explicit the non-analytic dependance of optimal…
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 analyze the valuation partial differential equation for European contingent claims in a general framework of stochastic volatility models where the diffusion coefficients may grow faster than linearly and degenerate on the boundaries of…
The effectiveness of utility-maximization techniques for portfolio management relies on our ability to estimate correctly the parameters of the dynamics of the underlying financial assets. In the setting of complete or incomplete financial…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We solve robust optimization problem and show the example of the market model for which the worst case measure is not a martingale measure. In our model the instantaneous interest rate is determined by the Hull-White model and the investor…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
This paper first describes a class of uncertain stochastic control systems with Markovian switching, and derives an It\^o-Liu formula for Markov-modulated processes. And we characterize an optimal control law, which satisfies the…
This paper studies a competitive optimal portfolio selection problem in a model where the interest rate, the appreciation rate and volatility rate of the risky asset are all stochastic processes, thus forming a non-Markovian financial…
In this paper, we search for optimal portfolio strategies in the presence of various risk measure that are common in financial applications. Particularly, we deal with the static optimization problem with respect to Value at Risk, Expected…
We consider a general class of diffusion-based models and show that, even in the absence of an Equivalent Local Martingale Measure, the financial market may still be viable, in the sense that strong forms of arbitrage are excluded and…
This paper studies relative arbitrage opportunities in a market with competitive investors through stochastic differential games in the limit as the number of players tends to infinity. With common noises introduced by the stock…
We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…
We consider the problem of maximizing expected utility from terminal wealth in models with stochastic factors. Using martingale methods and a conditioning argument, we determine the optimal strategy for power utility under the assumption…
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…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
This article clarifies the relationship between pricing kernel monotonicity and the existence of opportunities for stochastic arbitrage in a complete and frictionless market of derivative securities written on a market portfolio. The…