Related papers: Market models with optimal arbitrage
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 explore a nuance to 'no arbitrage' in relation to 'information efficiency': acting immediately on an arbitrage is sometimes suboptimal; in such cases optimised trading can suppress the anticipation of predictable risk-outcomes, thereby…
This paper deals with applications of coherent risk measures to pricing in incomplete markets. Namely, we study the No Good Deals pricing technique based on coherent risk. Two forms of this technique are presented: one defines a good deal…
This work focuses on the mathematical study of constant function market makers. We rigorously establish the conditions for optimal trading under the assumption of a quasilinear, but not necessarily convex (or concave), trade function. This…
We consider models of financial markets in which all parties involved find incentives to participate. Strategies are evaluated directly by their virtual wealths. By tuning the price sensitivity and market impact, a phase diagram with…
We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…
One index satisfies the duality axiom if one agent, who is uniformly more risk-averse than another, accepts a gamble, the latter accepts any less risky gamble under the index. Aumann and Serrano (2008) show that only one index defined for…
We study the modelling and valuation of surrender and other behavioural options in life insurance and pension. We place ourselves in between the two extremes of completely arbitrary intervention and optimal intervention by the policyholder.…
We define and study a lending game to model the interbank money market, in which lending banks strategically allocate their cash to borrowing banks. The interest rate offered by each borrowing bank is within the interest rate corridor set…
In this study we prove the existence of statistical arbitrage opportunities in the Black-Scholes framework by considering trading strategies that consists of borrowing from the risk free rate and taking a long position in the stock until it…
We consider an optimal liquidation problem with instantaneous price impact and stochastic resilience for small instantaneous impact factors. Within our modelling framework, the optimal portfolio process converges to the solution of an…
We study a robust stochastic optimization problem in the quasi-sure setting in discrete-time. We show that under a lineality-type condition the problem admits a maximizer. This condition is implied by the no-arbitrage condition in models of…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a framework to jointly identify similar assets through factors, identify mispricing and form a trading policy that maximizes risk-adjusted…
We apply Geometric Arbitrage Theory to obtain results in mathematical finance for credit markets, which do not need stochastic differential geometry in their formulation. We obtain closed form equations involving default intensities and…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
Computing market equilibria is an important practical problem for market design, for example in fair division of items. However, computing equilibria requires large amounts of information (typically the valuation of every buyer for every…
We investigate a market without money in which agents can offer certain goods (or multiple copies of an agent-specific good) in exchange for goods of other agents. The exchange must be balanced in the sense that each agent should receive a…
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 this article, a game-theoretic model is constructed that is related to the problem of optimal assignments. Examples are considered. A compromise point is found, the Nash equilibriums and the decision of the Nash arbitration scheme are…
Despite the stunning progress recently in large-scale deep neural network applications, our understanding of their microstructure, 'energy' functions, and optimal design remains incomplete. Here, we present a new game-theoretic framework,…