Related papers: On arbitrages arising from honest times
As financial institutions increasingly rely on machine learning models to automate lending decisions, concerns about algorithmic fairness have risen. This paper explores the tradeoff between enforcing fairness constraints (such as…
Decentralized exchanges using automated market makers create arbitrage opportunities with centralized exchanges, where gas fees and transaction ordering are critical. Existing models largely overlook competition among arbitrageurs, despite…
Generalized statistical arbitrage concepts are introduced corresponding to trading strategies which yield positive gains on average in a class of scenarios rather than almost surely. The relevant scenarios or market states are specified via…
Long-term relative arbitrage exists in markets where the excess growth rate of the market portfolio is bounded away from zero. Here it is shown that under a time-homogeneity hypothesis this condition will also imply the existence of…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a framework to jointly identify similar assets through factors, identify mispricing and form a trading policy that maximizes risk-adjusted…
Opportunities for stochastic arbitrage in an options market arise when it is possible to construct a portfolio of options which provides a positive option premium and which, when combined with a direct investment in the underlying asset,…
This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…
Given a finite honest time, we first show that the associated Az\'ema optional supermartingale can be expressed as the drawdown and the relative drawdown of some local optional supermartingales with continuous running supremum. The relative…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
We explore the role that random arbitrage opportunities play in hedging financial derivatives. We extend the asymptotic pricing theory presented by Fedotov and Panayides [Stochastic arbitrage return and its implication for option pricing,…
We give characterizations of asymptotic arbitrage of the first and second kind and of strong asymptotic arbitrage for large financial markets with small proportional transaction costs $\la_n$ on market $n$ in terms of contiguity properties…
The existence of time-lagged cross-correlations between the returns of a pair of assets, which is known as the lead-lag relationship, is a well-known stylized fact in financial econometrics. Recently some continuous-time models have been…
We develop a theory which applies to any market dynamics that satisfy a fair market assumption on the nullity of the average profit of simple market making strategies. We show that for any such fair market, there exists a martingale fair…
I study a repeated game in which a patient player (e.g., a seller) wants to win the trust of some myopic opponents (e.g., buyers) but can strictly benefit from betraying them. Her benefit from betrayal is strictly positive and is her…
No-arbitrage asset pricing characterizes valuation through the existence of equivalent martingale measures relative to a filtration and a class of admissible trading strategies. In practice, pricing is performed across multiple asset…
Expanding the ideas of the author's paper 'Nonexpansive maps and option pricing theory' (Kibernetica 34:6 (1998), 713-724) we develop a pure game-theoretic approach to option pricing, by-passing stochastic modeling. Risk neutral…
We consider the classical problem of building an arbitrage-free implied volatility surface from bid-ask quotes. We design a fast numerical procedure, for which we prove the convergence, based on the Sinkhorn algorithm that has been recently…
We treat a discrete-time asset allocation problem in an arbitrage-free, generically incomplete financial market, where the investor has a possibly non-concave utility function and wealth is restricted to remain non-negative. Under easily…
In this paper we investigate discrete time trading under integer constraints, that is, we assume that the offered goods or shares are traded in integer quantities instead of the usual real quantity assumption. For finite probability spaces…
The notion that economies should normally be in equilibrium is by now well-established; equally well-established is that economies are almost never precisely in equilibrium. Using a very general formulation, we show that under dynamics that…