Related papers: A Systematic Approach to Constructing Market Model…
In linear regression problems with related predictors, it is desirable to do variable selection and estimation by maintaining the hierarchical or structural relationships among predictors. In this paper we propose non-negative garrote…
This paper studies relative arbitrage opportunities in a market with competitive investors through stochastic differential games in the limit as the number of players tends to infinity. With common noises introduced by the stock…
We introduce a class of extensive form games where players might not be able to foresee the possible consequences of their decisions and form a model of their opponents which they exploit to achieve a more profitable outcome. We improve…
Models of social learning feature either binary signals or abstract signal structures often deprived of micro-foundations. Both models are limited when analyzing interim results or performing empirical analysis. We present a method of…
Financial options are contracts that specify the right to buy or sell an underlying asset at a strike price by an expiration date. Standard exchanges offer options of predetermined strike values and trade options of different strikes…
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…
We consider a conditional factor model for a multivariate portfolio of United States equities in the context of analysing a statistical arbitrage trading strategy. A state space framework underlies the factor model whereby asset returns are…
We construct algorithms for computation of prices and superhedging strategies for game options in general discrete markets both from the seller and the buyer points of view.
We study a continuous-time financial market with continuous price processes under model uncertainty, modeled via a family $\mathcal{P}$ of possible physical measures. A robust notion ${\rm NA}_{1}(\mathcal{P})$ of no-arbitrage of the first…
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 study decentralized markets with the presence of middlemen, modeled by a non-cooperative bargaining game in trading networks. Our goal is to investigate how the network structure of the market and the role of middlemen influence the…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…
Market making is a fundamental trading problem in which an agent provides liquidity by continually offering to buy and sell a security. The problem is challenging due to inventory risk, the risk of accumulating an unfavourable position and…
In this paper, we propose a novel method for matrix completion under general non-uniform missing structures. By controlling an upper bound of a novel balancing error, we construct weights that can actively adjust for the non-uniformity in…
Market making is a popular trading strategy, which aims to generate profit from the spread between the quotes posted at either side of the market. It has been shown that training market makers (MMs) with adversarial reinforcement learning…
Contrary to the claims made by several authors, a financial market model in which the price of a risky security follows a reflected geometric Brownian motion is not arbitrage-free. In fact, such models violate even the weakest no-arbitrage…
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…
Financial market forecasting remains a formidable challenge despite the surge in computational capabilities and machine learning advancements. While numerous studies have underscored the precision of computer-generated market predictions,…