Related papers: Uncertainty and absence of arbitrage opportunity

We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently…

This paper is devoted to a study of robust fundamental theorems of asset pricing in discrete time and finite horizon settings. Uncertainty is modelled by a (possibly uncountable) family of price processes on the same probability space. Our…

In this article, we show necessary and sufficient conditions for a function to transform a continuous Markov semimartingale to a semimartingale. As a result, the no-arbitrage principle guarantees the differentiability of asset prices with…

We show that coherent risk measures are ineffective in curbing the behaviour of investors with limited liability or excessive tail-risk seeking behaviour if the market admits statistical arbitrage opportunities which we term…

Absence-of-Arbitrage (AoA) is the basic assumption underpinning derivatives pricing theory. As part of the OTC derivatives market, the CDS market not only provides a vehicle for participants to hedge and speculate on the default risks of…

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…

We discuss final-offer arbitration where two quantitative issues are in dispute and model it as a zero-sum game. Under reasonable assumptions we both derive a pure strategy pair and show that it is both a local equilibrium and furthermore…

Bayesian rationality in strategic games presumes that it is possible to translate strategic uncertainty into imperfect information. Correlated equilibrium is guided by the idea that players are Bayes rational, have a common prior, and…

We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…

We consider non-concave and non-smooth random utility functions with do- main of definition equal to the non-negative half-line. We use a dynamic pro- gramming framework together with measurable selection arguments to establish both the…

The problem of allocating scarce items to individuals is an important practical question in market design. An increasingly popular set of mechanisms for this task uses the concept of market equilibrium: individuals report their preferences,…

Fairness in language models is typically studied as a property of a single, centrally optimized model. As large language models become increasingly agentic, we propose that fairness emerges through interaction and exchange. We study this…

We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…

A market model with $d$ assets in discrete time is considered where trades are subject to proportional transaction costs given via bid-ask spreads, while the existence of a num\`eraire is not assumed. It is shown that robust no arbitrage…

This paper presents an approach for developing the explanation capabilities of rule-based expert systems managing imprecise and uncertain knowledge. The treatment of uncertainty takes place in the framework of possibility theory where the…

This paper examines strategic trading under incomplete information, where firms lack full knowledge of key aspects of their competitors' trading strategies such as target sizes and market impact models. We extend previous work on…

Inferring from inconsistency and making decisions are two problems which have always been treated separately by researchers in Artificial Intelligence. Consequently, different models have been proposed for each category. Different…

We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…

This paper provides a general characterization of subgame perfect equilibria for strategic timing problems, where two firms have the (real) option to make an irreversible investment. Profit streams are uncertain and depend on the market…

Asset liquidity in modern financial markets is a key but elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus…