Related papers: A Modern Approach to the Efficient-Market Hypothes…
The relative arbitrage portfolio outperforms a benchmark portfolio over a given time-horizon with probability one. With market price of risk processes depending on the market portfolio and investors, this paper analyzes the multi-agent…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
We study bilateral trade between two strategic agents. The celebrated result of Myerson and Satterthwaite states that in general, no incentive-compatible, individually rational and weakly budget balanced mechanism can be efficient. I.e., no…
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,…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
In the context of a general semimartingale model of a complete market, we aim at answering the following question: How much is an investor willing to pay for learning some inside information that allows to achieve arbitrage? If such a value…
In a unified framework we study equilibrium in the presence of an insider having information on the signal of the firm value, which is naturally connected to the fundamental price of the firm related asset. The fundamental value itself is…
Many complex systems exhibit extreme events far more often than expected for a normal distribution. This work examines how self-similar bursts of activity across several orders of magnitude can emerge from first principles in systems that…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
We formulate conditions for the solvability of the problem of robust utility maximization from final wealth in continuous time financial markets, without assuming weak compactness of the densities of the uncertainty set, as customary in the…
We introduce a simple benchmark model of dynamic matching in networked markets, where agents arrive and depart stochastically and the network of acceptable transactions among agents forms a random graph. We analyze our model from three…
In setting up a stochastic description of the time evolution of a financial index, the challenge consists in devising a model compatible with all stylized facts emerging from the analysis of financial time series and providing a reliable…
We consider a market of risky financial assets whose participants are an informed trader, a representative uninformed trader, and noisy liquidity providers. We prove the existence of a market-clearing equilibrium when the insider…
Following the idea of Bayesian learning via Gaussian mixture model, we organically combine the backward-looking information contained in the historical data and the forward-looking information implied by the market portfolio, which is…
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…
This paper is part of an ongoing investigation of "pragmatic information", defined in Weinberger (2002) as "the amount of information actually used in making a decision". Because a study of information rates led to the Noiseless and Noisy…
Prediction markets provide an efficient means to assess uncertain quantities from forecasters. Traditional and competitive strictly proper scoring rules have been shown to incentivize players to provide truthful probabilistic forecasts.…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
We consider a trader who aims to liquidate a large position in the presence of an arbitrageur who hopes to profit from the trader's activity. The arbitrageur is uncertain about the trader's position and learns from observed price…
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…