Related papers: Uncertainty and absence of arbitrage opportunity
In the ever evolving landscape of decentralized finance automated market makers (AMMs) play a key role: they provide a market place for trading assets in a decentralized manner. For so-called bluechip pairs, arbitrage activity provides a…
We experimentally study a game in which success requires a sufficient total contribution by members of a group. There are significant uncertainties surrounding the chance and the total effort required for success. A theoretical model with…
A risk analyst assesses potential financial losses based on multiple sources of information. Often, the assessment does not only depend on the specification of the loss random variable but also various economic scenarios. Motivated by this…
We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We…
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…
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…
The present paper deals with the characterization of no-arbitrage properties of a continuous semimartingale. The first main result, Theorem \refMainTheoremCharNA, extends the no-arbitrage criterion by Levental and Skorohod [Ann. Appl.…
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…
Reasoning about uncertainty is vital in many real-life autonomous systems. However, current state-of-the-art planning algorithms cannot either reason about uncertainty explicitly, or do so with a high computational burden. Here, we focus on…
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…
We propose a decision-analytical approach to comparing the flexibility of decision situations from the perspective of a decision-maker who exhibits constant risk-aversion over a monetary value model. Our approach is simple yet seems to be…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
Probability forecasts are intended to account for the uncertainties inherent in forecasting. It is suggested that from an end-user's point of view probability is not necessarily sufficient to reflect uncertainties that are not simply the…
Market impact is the link between the volume of a (large) order and the price move during and after the execution of this order. We show that under no-arbitrage assumption, the market impact function can only be of power-law type.…
A fundamental question about a market is under what conditions, and then how rapidly, does price signaling cause price equilibration. Qualitatively, this ought to depend on how well-connected the market is. We address this question…
I introduce novel preference formulations which capture aversion to ambiguity about unknown and potentially time-varying volatility. I compare these preferences with Gilboa and Schmeidler's maxmin expected utility as well as variational…
This paper considers dynamic moral hazard settings, in which the consequences of the agent's actions are not precisely understood. In a new continuous-time moral hazard model with drift ambiguity, the agent's unobservable action translates…
A step to consilience, starting with a deconstruction of the causality of uncertainty that is embedded in the fundamentals of growth and inequality, following a construction of aggregation laws that disclose the invariance principle across…
In this paper, a general framework is developed for continuous-time financial market models defined from simple strategies through conditional topologies that avoid stochastic calculus and do not necessitate semimartingale models. We then…
Our study shows that many firms would accumulate at zero output level (namely, Bankruptcy status) if a perfectly competitive market reaches full employment (namely, those people who should obtain employment have obtained employment). As a…