Related papers: Market models with optimal arbitrage
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
In this paper, we extend the optimal securitisation model of Pag\`es [50] and Possama\"i and Pag\`es [51] between an investor and a bank to a setting allowing both moral hazard and adverse selection. Following the recent approach to these…
We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing…
We introduce a criterion how to price derivatives in incomplete markets, based on the theory of growth optimal strategy in repeated multiplicative games. We present reasons why these growth-optimal strategies should be particularly relevant…
In principal-agent models, a principal offers a contract to an agent to perform a certain task. The agent exerts a level of effort that maximizes her utility. The principal is oblivious to the agent's chosen level of effort, and conditions…
In the frictionless discrete time financial market of Bouchard et al.(2015) we consider a trader who, due to regulatory requirements or internal risk management reasons, is required to hedge a claim $\xi$ in a risk-conservative way relative…
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…
We propose two solution concepts for matchings under preferences: robustness and near stability. The former strengthens while the latter relaxes the classic definition of stability by Gale and Shapley (1962). Informally speaking, robustness…
We consider a general class of diffusion-based models and show that, even in the absence of an Equivalent Local Martingale Measure, the financial market may still be viable, in the sense that strong forms of arbitrage are excluded and…
This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…
We introduce polynomial processes in the sense of [8] in the context of stochastic portfolio theory to model simultaneously companies' market capitalizations and the corresponding market weights. These models substantially extend volatility…
Price benchmarks are used to incorporate market price trends into contracts, but their use can create opportunities for manipulation by parties involved in the contract. This paper examines this issue using a realistic and tractable model…
We consider portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We consider fundamental questions of arbitrage pricing arising when the uncertainty model is given by a set of possible mutually singular probability measures. With a single probability model, essential equivalence between the absence of…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
The capitalization-weighted total relative variation $\sum_{i=1}^d \int_0^\cdot \mu_i (t) \mathrm{d} \langle \log \mu_i \rangle (t)$ in an equity market consisting of a fixed number $d$ of assets with capitalization weights $\mu_i (\cdot)$…
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to…
This paper extends the optimal-trading framework developed in arXiv:2409.03586v1 to compute optimal strategies with real-world constraints. The aim of the current paper, as with the previous, is to study trading in the context of…