Related papers: An example of short-term relative arbitrage
We argue that contemporary stock market designs are, due to traders' inability to fully express their preferences over the execution times of their orders, prone to latency arbitrage. In turn, we propose a new order type which allows…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
We extend Relative Robust Portfolio Optimisation models to allow portfolios to optimise their distance to a set of benchmarks. Portfolio managers are also given the option of computing regret in a way which is more in line with market…
This paper investigates the time-varying risk-premium relation of the Chinese stock markets within the framework of cross-sectional momentum and contrarian effects by adopting the Capital Asset Pricing Model and the French-Fama three factor…
In this paper, we consider $n$ agents who invest in a general financial market that is free of arbitrage and complete. The aim of each investor is to maximize her expected utility while ensuring, with a specified probability, that her…
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…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
The existing approaches to sparse wealth allocations (1) are limited to low-dimensional setup when the number of assets is less than the sample size; (2) lack theoretical analysis of sparse wealth allocations and their impact on portfolio…
This paper introduces a relative model risk measure of a product priced with a given model, with respect to another reference model for which the market is assumed to be driven. This measure allows comparing products valued with different…
We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…
The problem of estimation error in portfolio optimization is discussed, in the limit where the portfolio size N and the sample size T go to infinity such that their ratio is fixed. The estimation error strongly depends on the ratio N/T and…
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a…
We unify and establish equivalence between the pathwise and the quasi-sure approaches to robust modelling of financial markets in discrete time. In particular, we prove a Fundamental Theorem of Asset Pricing and a Superhedging Theorem,…
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…
A relation extends another relation consistently if its symmetric, respectively its asymmetric, part contains the corresponding part of the smaller relation. It is shown that there exists no finite circular chain made from two transitive…
We consider self-averaging sequences in which each term is a weighted average over previous terms. For several sequences of this kind it is known that they do not converge to a limit. These sequences share the property that $n$th term is…
In commodity markets the convergence of futures towards spot prices, at the expiration of the contract, is usually justified by no-arbitrage arguments. In this article, we propose an alternative approach that relies on the expected profit…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…
We construct a diffusion approximation of a repeated game in which agents make bets on outcomes of i.i.d. random vectors and their strategies are close to an asymptotically optimal strategy. This model can be interpreted as trading in an…
In this paper, a general framework is developed for continuous-time financial market models defined from simple strategies through conditional topologies that avoid stochastic calculus and do not necessitate semimartingale models. We then…