Related papers: Arbitrage theory without a num\'eraire
Quantum computers have the potential to provide an advantage for financial pricing problems by the use of quantum estimation. In a broader context, it is reasonable to ask about situations where the market and the assets traded on the…
It is shown that delta hedging provides the optimal trading strategy in terms of minimal required initial capital to replicate a given terminal payoff in a continuous-time Markovian context. This holds true in market models where no…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
A concept of martingale-fair index of return, consistent with Arbitrage Free Pricing Theory, is introduced. An explicit formula for the average rate of return of a group of investment/pension funds in a discrete time stochastic model is…
We present an arbitrage-free non-parametric yield curve prediction model which takes the full (discretized) yield curve as state variable. We believe that absence of arbitrage is an important model feature in case of highly correlated data,…
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 are interested in the existence of equivalent martingale measures and the detection of arbitrage opportunities in markets where several multi-asset derivatives are traded simultaneously. More specifically, we consider a financial market…
We give characterizations of asymptotic arbitrage of the first and second kind and of strong asymptotic arbitrage for large financial markets with small proportional transaction costs $\la_n$ on market $n$ in terms of contiguity properties…
Geometric Arbitrage Theory reformulates a generic asset model possibly allowing for arbitrage by packaging all assets and their forwards dynamics into a stochastic principal fibre bundle, with a connection whose parallel transport encodes…
In this article we present a continuous time model for natural gas and crude oil future prices. Its main feature is the possibility to link both energies in the long term and in the short term. For each energy, the future returns are…
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…
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…
Statistical arbitrage is a class of financial trading strategies using mean reversion models. The corresponding techniques rely on a number of assumptions which may not hold for general non-stationary stochastic processes. This paper…
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…
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…
In this paper we give a financial justification, based on non arbitrage conditions, of the $(H)$ hypothesis in default time modelling. We also show how the $(H)$ hypothesis is affected by an equivalent change of probability measure. The…
This study evaluates the practical usefulness of continuous-time arbitrage strategies designed to exploit serial correlation in fractional financial markets. Specifically, we revisit the strategies of Shiryaev (1998) and Salopek (1998) and…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
We establish deterministic necessary and sufficient conditions for the no-arbitrage notions "no increasing profit" (NIP), "no strong arbitrage" (NSA) and "no unbounded profit with bounded risk" (NUPBR) in one-dimensional general diffusion…
We prove three theorems about the exact solutions of a generalized or interacting Black-Scholes equation that explicitly includes arbitrage bubbles. These arbitrage bubbles can be characterized by an arbitrage number $A_N(T)$. The first…