Related papers: Market models with optimal arbitrage

In the framework of stochastic portfolio theory we introduce rank volatility stabilized models for large equity markets over long time horizons. These models are rank-based extensions of the volatility stabilized models introduced by…

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 derive the arbitrage gains or, equivalently, Loss Versus Rebalancing (LVR) for arbitrage between \textit{two imperfectly liquid} markets, extending prior work that assumes the existence of an infinitely liquid reference market. Our…

We show that in an equity market model with Knightian uncertainty regarding the relative risk and covariance structure of its assets, the arbitrage function -- defined as the reciprocal of the highest return on investment that can be…

Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…

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…

The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…

We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…

We study the upper hedging price for contingent claims in market models with strong types of arbitrage: increasing profit, strong arbitrage, and arbitrage of the first kind. The existence of arbitrage may make the price smaller than if it…

We consider an exchange who wishes to set suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we are able to describe in quasi-explicit form the optimal contract to propose to a market maker. This…

This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…

Statistical arbitrage methods identify mispricings in securities with the goal of building portfolios which are weakly correlated with the market. In pairs trading, an arbitrage opportunity is identified by observing relative price…

We characterize absence of arbitrage with simple trading strategies in a discounted market with a constant bond and several risky assets. We show that if there is a simple arbitrage, then there is a 0-admissible one or an obvious one, that…

Optimal reinsurance when Value at Risk and expected surplus is balanced through their ratio is studied, and it is demonstrated how results for risk-adjusted surplus can be utilized. Simplifications for large portfolios are derived, and this…

An important factor in the practical implementation of optimization models is the acceptance by the intended users. This is influenced among other factors by the interpretability of the solution process. Decision rules that meet this…

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…

This note develops an arbitrage theory for a discrete-time market model without the assumption of the existence of a num\'eraire asset. Fundamental theorems of asset pricing are stated and proven in this context. The distinction between the…

The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…

We consider a discrete-time financial market model with finite time horizon and give conditions which guarantee the existence of an optimal strategy for the problem of maximizing expected terminal utility. Equivalent martingale measures are…

In most cases, insurance contracts are linked to the financial markets, such as through interest rates or equity-linked insurance products. To motivate an evaluation rule in these hybrid markets, Artzner et al. (2022) introduced the notion…