Related papers: On arbitrages arising from honest times

There has been much recent work on the revenue-raising properties of truthful mechanisms for selling goods to selfish bidders. Typically the revenue of a mechanism is compared against a benchmark (such as, the maximum revenue obtainable by…

We investigate the impossibility of universally winning trading strategies -- those generating strict profit across all market trajectories -- through three distinct mathematical paradigms. Fundamentally, under standard admissibility…

This paper considers a sequence of discrete-time random walk markets with a safe and a single risky investment opportunity, and gives conditions for the existence of arbitrages or free lunches with vanishing risk, of the form of waiting to…

We consider a dynamic market model of liquidity where unmatched buy and sell limit orders are stored in order books. The resulting net demand surface constitutes the sole input to the model. We prove that generically there is no arbitrage…

This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing…

We build a general model for pricing defaultable claims. In addition to the usual absence of arbitrage assumption, we assume that one defaultable asset (at least) looses value when the default occurs. We prove that under this assumption, in…

In this short note we show how virtual arbitrage opportunities can be modelled and included in the standard derivative pricing without changing the general framework.

In a model free discrete time financial market, we prove the superhedging duality theorem, where trading is allowed with dynamic and semi-static strategies. We also show that the initial cost of the cheapest portfolio that dominates a…

We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the…

We consider models of financial markets in which all parties involved find incentives to participate. Strategies are evaluated directly by their virtual wealths. By tuning the price sensitivity and market impact, a phase diagram with…

This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…

We consider a setting where in a known future time, a certain continuous random variable will be realized. There is a public prediction that gradually converges to its realized value, and an expert that has access to a more accurate…

No trade theorems examine conditions under which agents cannot agree to disagree on the value of a security which pays according to some state of nature, thus preventing any mutual agreement to trade. A large literature has examined…

The Ultimatum Game (UG) is an economic game where two players (proposer and responder) decide how to split a certain amount of money. While traditional economic theories based on rational decision making predict that the proposer should…

We discuss martingales, detrending data, and the efficient market hypothesis for stochastic processes x(t) with arbitrary diffusion coefficients D(x,t). Beginning with x-independent drift coefficients R(t) we show that Martingale stochastic…

We prove the superhedging duality for a discrete-time financial market with proportional transaction costs under model uncertainty. Frictions are modeled through solvency cones as in the original model of [Kabanov, Y., Hedging and…

We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…

We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…

It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…

We investigate brokerage between traders from an online learning perspective. At any round $t$, two traders arrive with their private valuations, and the broker proposes a trading price. Unlike other bilateral trade problems already studied…