Related papers: A Systematic Approach to Constructing Market Model…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
An agent-based modelling methodology for the joint price evolution of two stocks is put forward. The method models future multidimensional price trajectories reflecting how a class of agents rebalance their portfolios in an operational way…
We study the optimal control of storage which is used for arbitrage, i.e. for buying a commodity when it is cheap and selling it when it is expensive. Our particular concern is with the management of energy systems, although the results are…
We provide a Fundamental Theorem of Asset Pricing and a Superhedging Theorem for a model independent discrete time financial market with proportional transaction costs. We consider a probability-free version of the Robust No Arbitrage…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
The general method is proposed for constructing a family of martingale measures for a wide class of evolution of risky assets. The sufficient conditions are formulated for the evolution of risky assets under which the family of equivalent…
We introduce a constructive method that provides the local solution of general implicit systems in arbitrary dimension via Hamiltonian type equations. A variant of this approach constructs parametrizations of the manifold, extending the…
We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…
We investigate triangular arbitrage within the spot foreign exchange market using high-frequency executable prices. We show that triangular arbitrage opportunities do exist, but that most have short durations and small magnitudes. We find…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
This paper focuses on the stability of the non-arbitrage condition in discrete time market models when some unknown information $\tau$ is partially/fully incorporated into the market. Our main conclusions are twofold. On the one hand, for a…
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…
In an equity market model with "Knightian" uncertainty regarding the relative risk and covariance structure of its assets, we characterize in several ways the highest return relative to the market that can be achieved using nonanticipative…
Statistical arbitrage is a prevalent trading strategy which takes advantage of mean reverse property of spread of paired stocks. Studies on this strategy often rely heavily on model assumption. In this study, we introduce an innovative…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
In this paper a finite discrete time market with an arbitrary state space and bid-ask spreads is considered. The notion of an equivalent bid-ask martingale measure (EBAMM) is introduced and the fundamental theorem of asset pricing is proved…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…
We propose a simple market model where agents trade different types of products with each other by using money, relying only on local information. Value fluctuations of single products, combined with the condition of maximum profit in…
We derive deterministic criteria for the existence and non-existence of equivalent (local) martingale measures for financial markets driven by multi-dimensional time-inhomogeneous diffusions. Our conditions can be used to construct…