Related papers: Arbitrage in markets with bid-ask spreads

Statistical properties of order-driven double-auction markets with Bid-Ask spread are investigated through the dynamical quantities such as response function. We first attempt to utilize the so-called {\it Madhavan-Richardson-Roomans model}…

Finding Bertram's optimal trading strategy for a pair of cointegrated assets following the Ornstein--Uhlenbeck price difference process can be formulated as an unconstrained convex optimization problem for maximization of expected profit…

We consider the problem of fair allocation of indivisible goods to $n$ agents, with no transfers. When agents have equal entitlements, the well established notion of the maximin share (MMS) serves as an attractive fairness criterion, where…

We discuss final-offer arbitration where two quantitative issues are in dispute and model it as a zero-sum game. Under reasonable assumptions we both derive a pure strategy pair and show that it is both a local equilibrium and furthermore…

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…

Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…

In a seminal paper, F. Delbaen and W. Schachermayer proved that the classical NA ("no arbitrage") condition implies the existence of an "absolutely continuous local martingale measure" (ACLMM). It is known that in general the existence of…

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…

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 introduce a new class of combinatorial markets in which agents have covering constraints over resources required and are interested in delay minimization. Our market model is applicable to several settings including scheduling, cloud…

In this work we consider three problems of the standard market approach to pricing of credit index options: the definition of the index spread is not valid in general, the usually considered payoff leads to a pricing which is not always…

In the paper we study markets with concave transaction costs which depend in a concave way on the volume of transaction. This is typical situation in the case of small investors, which commonly appears in currency and real estate markets.…

We develop the fundamental theorem of asset pricing in a probability-free infinite-dimensional setup. We replace the usual assumption of a prior probability by a certain continuity property in the state variable. Probabilities enter then…

We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in…

We revisit mean-risk portfolio selection in a one-period financial market where risk is quantified by a positively homogeneous risk measure $\rho$. We first show that under mild assumptions, the set of optimal portfolios for a fixed return…

We introduce a new definition of speculative bubbles in discrete-time models based on the discounted stock price losing mass at some finite drop-down under an equivalent martingale measure. We provide equivalent probabilistic…

Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…

Double no-touch options, contracts which pay out a fixed amount provided an underlying asset remains within a given interval, are commonly traded, particularly in FX markets. In this work, we establish model-free bounds on the price of…

The target of this paper is to consider model the risky asset price on the financial market under the Knightian uncertainty, and pricing the ask and bid prices of the uncertain risk. We use the nonlinear analysis tool, i.e., G-frame work…

We extend the classical Cox-Ross-Rubinstein binomial model in two ways. We first develop a binomial model with time-dependent parameters that equate all moments of the pricing tree increments with the corresponding moments of the increments…