Related papers: Arbitrage in markets with bid-ask spreads

We study contingent claims in a discrete-time market model where trading costs are given by convex functions and portfolios are constrained by convex sets. In addition to classical frictionless markets and markets with transaction costs or…

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 1999 Robert Fernholz observed an inconsistency between the normative assumption of existence of an equivalent martingale measure (EMM) and the empirical reality of diversity in equity markets. We explore a method of imposing diversity on…

Given a set-valued stochastic process $(V_t)_{t=0}^T$, we say that the martingale selection problem is solvable if there exists an adapted sequence of selectors $\xi_t\in V_t$, admitting an equivalent martingale measure. The aim of this…

We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…

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…

This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…

In this paper, a quantum model for the binomial market in finance is proposed. We show that its risk-neutral world exhibits an intriguing structure as a disk in the unit ball of ${\bf R}^3,$ whose radius is a function of the risk-free…

In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…

We investigate the implementation of reduced-form allocation probabilities in a two-person bargaining problem without side payments, where the agents have to select one alternative from a finite set of social alternatives. We provide a…

We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…

We provide a general framework for no-arbitrage concepts in topological vector lattices, which covers many of the well-known no-arbitrage concepts as particular cases. The main structural condition we impose is that the outcomes of trading…

For several decades, the no-arbitrage (NA) condition and the martingale measures have played a major role in the financial asset's pricing theory. We propose a new approach for estimating the super-replication cost based on convex duality…

A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…

We propose a continuous time model for financial markets with proportional transactions costs and a continuum of risky assets. This is motivated by bond markets in which the continuum of assets corresponds to the continuum of possible…

This paper develops a model for the bid and ask prices of a European type asset by formulating a stochastic control problem. The state process is governed by a modified geometric Brownian motion whose drift and diffusion coefficients depend…

We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…

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…

We construct and study market models admitting optimal arbitrage. We say that a model admits optimal arbitrage if it is possible, in a zero-interest rate setting, starting with an initial wealth of 1 and using only positive portfolios, to…

We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…