Related papers: Robust Financial Bubbles
In this paper, we provide a comprehensive review of recent advances in robust portfolio selection problems and their extensions, from both operational research and financial perspectives. A multi-dimensional classification of the models and…
A general theory of innovation and progress in human society is outlined, based on the combat between two opposite forces (conservatism/inertia and speculative herding "bubble" behavior). We contend that human affairs are characterized by…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
We study a continuous-time financial market with continuous price processes under model uncertainty, modeled via a family $\mathcal{P}$ of possible physical measures. A robust notion ${\rm NA}_{1}(\mathcal{P})$ of no-arbitrage of the first…
In the presence of model risk, it is well-established to replace classical expected values by worst-case expectations over all models within a fixed radius from a given reference model. This is the "robustness" approach. We show that…
Asset price bubbles are situations where asset prices exceed the fundamental values defined by the present value of dividends. This paper presents a conceptually new perspective: the necessity of bubbles. We establish the Bubble Necessity…
In this paper we introduce a sublinear conditional expectation with respect to a family of possibly nondominated probability measures on a progressively enlarged filtration. In this way, we extend the classic reduced-form setting for credit…
We study asset price bubbles in market models with proportional transaction costs $\lambda\in (0,1)$ and finite time horizon $T$ in the setting of [49]. By following [28], we define the fundamental value $F$ of a risky asset $S$ as the…
We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset…
We analyze how uncertain technologies should be robustly regulated and how regulation should evolve with new information. An adaptive sandbox comprising a zero marginal tax up to an evolving quantity limit is (i) robust: it delivers optimal…
Robust models in mathematical finance replace the classical single probability measure by a sufficiently rich set of probability measures on the future states of the world to capture (Knightian) uncertainty about the "right" probabilities…
We highlight a very simple statistical tool for the analysis of financial bubbles, which has already been studied in [1]. We provide extensive empirical tests of this statistical tool and investigate analytically its link with stocks…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
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…
Stablecoins are one of the most widely capitalized type of cryptocurrency. However, their risks vary significantly according to their design and are often poorly understood. We seek to provide a sound foundation for stablecoin theory, with…
We study notions of robustness of Markov kernels and probability distribution of a system that is described by $n$ input random variables and one output random variable. Markov kernels can be expanded in a series of potentials that allow to…
Many financial and economic variables, including financial returns, exhibit nonlinear dependence, heterogeneity and heavy-tailedness. These properties may make problematic the analysis of (non-)efficiency and volatility clustering in…
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory…
A variety of approaches has been developed to deal with uncertain optimization problems. Often, they start with a given set of uncertainties and then try to minimize the influence of these uncertainties. Depending on the approach used, the…