Related papers: Volatility and Arbitrage
We investigate the use of the normalized imbalance between option volumes corresponding to positive and negative market views, as a predictor for directional price movements in the spot market. Via a nonlinear analysis, and using a…
In this work, we study the problem of mean-variance hedging with a random horizon T ^ tau, where T is a deterministic constant and is a jump time of the underlying asset price process. We rst formulate this problem as a stochastic control…
We show that in an equity market model with Knightian uncertainty regarding the relative risk and covariance structure of its assets, the arbitrage function -- defined as the reciprocal of the highest return on investment that can be…
Single index financial market models cannot account for the empirically observed complex interactions between shares in a market. We describe a multi-share financial market model and compare characteristics of the volatility, that is the…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
In this paper, we consider a continuous-time mean-variance portfolio selection with regime-switching and random horizon. Unlike previous works, the dynamic of assets are described by non-Markovian regime-switching models in the sense that…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…
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…
This paper proposes two approaches that quantify the exact relationship among the viability, the absence of arbitrage, and/or the existence of the num\'eraire portfolio under minimal assumptions and for general continuous-time market…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
We examine the possibility of incorporating information or views of market movements during the holding period of a portfolio, in the hedging of European options with respect to the underlying. Given a fixed holding period interval, we…
Polymarket is a prediction market platform where users can speculate on future events by trading shares tied to specific outcomes, known as conditions. Each market is associated with a set of one or more such conditions. To ensure proper…
We introduce an arbitrage-free framework for robust valuation adjustments. An investor trades a credit default swap portfolio with a risky counterparty, and hedges credit risk by taking a position in defaultable bonds. The investor does not…
We consider the problem of robustly maximizing the growth rate of investor wealth in the presence of model uncertainty. Possible models are all those under which the assets' region $E$ and instantaneous covariation $c$ are known, and where…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
This paper studies the continuous time mean-variance portfolio selection problem with one kind of non-linear wealth dynamics. To deal the expectation constraint, an auxiliary stochastic control problem is firstly solved by two new…
We analyze the valuation partial differential equation for European contingent claims in a general framework of stochastic volatility models where the diffusion coefficients may grow faster than linearly and degenerate on the boundaries of…
We present results for the so-called `bar-attendance' model of market behavior: $p$ adaptive agents, each possessing $n$ prediction rules chosen randomly from a pool, attempt to attend a bar whose cut-off is $s$. The global attendance…