Related papers: Self-Financing Trading and the Ito-Doeblin Lemma

We study the problem of designing a two-sided market (double auction) to maximize the gains from trade (social welfare) under the constraints of (dominant-strategy) incentive compatibility and budget-balance. Our goal is to do so for an…

We introduce a new formulation of asset trading games in continuous time in the framework of the game-theoretic probability established by Shafer and Vovk (Probability and Finance: It's Only a Game! (2001) Wiley). In our formulation, the…

Bilateral trade, a fundamental topic in economics, models the problem of intermediating between two strategic agents, a seller and a buyer, willing to trade a good for which they hold private valuations. Despite the simplicity of this…

We study paycheck optimization, which examines how to allocate income in order to achieve several competing financial goals. For paycheck optimization, a quantitative methodology is missing, due to a lack of a suitable problem formulation.…

This paper focuses on the study of an original combination of the Multilevel Monte Carlo method introduced by Giles [10] and the popular importance sampling technique. To compute the optimal choice of the parameter involved in the…

Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…

We postulates, and then show experimentally, that liquidity deficit is the driving force of the markets. In the first part of the paper a kinematic of liquidity deficit is developed. The calculus-like approach, which is based on…

We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…

Estimating and controlling large risks has become one of the main concern of financial institutions. This requires the development of adequate statistical models and theoretical tools (which go beyond the traditionnal theories based on…

We generalize the seminal framework of Kyle (1985) to a many-asset setting, bridging the gap between informed-trading theory and modern trading practices. Specifically, we formulate an infinite-dimensional Bayesian trading game in which the…

Expanding the ideas of the author's paper 'Nonexpansive maps and option pricing theory' (Kibernetica 34:6 (1998), 713-724) we develop a pure game-theoretic approach to option pricing, by-passing stochastic modeling. Risk neutral…

We discuss the objectives of automation equipped with non-trivial decision making, or creating artificial intelligence, in the financial markets and provide a possible alternative. Intelligence might be an unintended consequence of…

The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…

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…

This paper investigates the dependence of functional portfolio generation, introduced by Fernholz (1999), on an extra finite variation process. The framework of Karatzas and Ruf (2017) is used to formulate conditions on trading strategies…

Over the past two decades, some scholars have noticed the correlation between quantum mechanics and finance/economy, making some novel attempts to introduce the theoretical framework of quantum mechanics into financial and economic…

This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…

We study the bilateral trade problem: one seller, one buyer and a single, indivisible item for sale. It is well known that there is no fully-efficient and incentive compatible mechanism for this problem that maintains a balanced budget. We…

The goal of this paper is to debunk and dispel the magic behind the black-box quantitative strategies. It aims to build a solid foundation on how and why the techniques work. This manuscript crystallizes this knowledge by deriving from…

A phenomenon of the financial log-periodicity is discussed and the characteristics that amplify its predictive potential are elaborated. The principal one is self-similarity that obeys across all the time scales. Furthermore the same…