Related papers: Statistical Arbitrage in the Black-Scholes Framewo…
Generalized statistical arbitrage concepts are introduced corresponding to trading strategies which yield positive gains on average in a class of scenarios rather than almost surely. The relevant scenarios or market states are specified via…
We consider a non-stochastic online learning approach to price financial options by modeling the market dynamic as a repeated game between the nature (adversary) and the investor. We demonstrate that such framework yields analogous…
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…
The Black-Scholes option pricing model remains a cornerstone in financial mathematics, yet its application is often challenged by the need for accurate hedging strategies, especially in dynamic market environments. This paper presents a…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
The paper studies the concepts of hedging and arbitrage in a non probabilistic framework. It provides conditions for non probabilistic arbitrage based on the topological structure of the trajectory space and makes connections with the usual…
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…
We propose a numerical procedure for computing the prices of European options, in which the underlying asset price is a Markovian strict local martingale. If the underlying process is a strict local martingale and the payoff is of linear…
The paper develops no arbitrage results for trajectory based models by imposing general constraints on the trading portfolios. The main condition imposed, in order to avoid arbitrage opportunities, is a local continuity requirement on the…
We present an approach, based on deep neural networks, that allows identifying robust statistical arbitrage strategies in financial markets. Robust statistical arbitrage strategies refer to trading strategies that enable profitable trading…
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 study seeks to develop an effective strategy based on the novel framework of statistical arbitrage based on graph clustering algorithms. Amalgamation of quantitative and machine learning methods, including the Kelly criterion, and an…
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…
We show that a trader, who starts with no initial wealth and is not allowed to borrow money or short sell assets, is theoretically able to attain positive wealth by continuous trading, provided that she has perfect foresight of future asset…
No--arbitrage property provides a simple method for pricing financial derivatives. However, arbitrage opportunities exist among different markets in various fields, even for a very short time. By knowing that an arbitrage property exists,…
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…
\begin{abstract} In this paper, we integrated the statistical arbitrage strategy, pairs trading, into the Black-Litterman model and constructed efficient mean-variance portfolios. Typically, pairs trading underperforms under volatile or…
We show how to derive the Black-Scholes model and its generalisation to the `exchange-option' (to exchange one asset for another) via the continuum limit of the Binomial tree. No knowledge of stochastic calculus or partial differential…
We derive integral tests for the existence and absence of arbitrage in a financial market with one risky asset which is either modeled as stochastic exponential of an Ito process or a positive diffusion with Markov switching. In particular,…
We introduce and discuss a general criterion for the derivative pricing in the general situation of incomplete markets, we refer to it as the No Almost Sure Arbitrage Principle. This approach is based on the theory of optimal strategy in…